Pros and cons of surrendering your life insurance policy

Surrendering your life insurance policy means telling your insurer that you don’t want to pay the monthly premiums anymore and that you are no longer interest in the plan. People surrender their life insurance policy mainly because they cannot afford the premiums. Some take this decision because they have found a better deal elsewhere. Others surrender their plan because their beneficiaries are now financially dependent and they don’t need it anymore. Regardless, before you decide to cash in your life insurance plan, we advise you to read the pros and cons of surrendering your life insurance policy.

Pros

  1. You will get a portion of your funds back
  2. You can get a better deal elsewhere
  3. You can use the funds as a source of liquid to finance an emergency

Cons

  1. You will lose your life insurance coverage
  2. your beneficiary will not receive your death benefit.
  3. You can no longer borrow money from your cash value
  4. You will pay surrender charges if your policy isn’t very old.
  5. Your funds will be taxed.
  6. You will not receive any bonus or dividend from the life insurance company again

Bottom line

As you can see, the cons of surrendering your life insurance overshadow the pros of surrendering your life insurance. So, we advise you to think twice before making such decision. Or better still, you should contact us or your financial advisor for further advice.