When financial obligations change, many people start thinking about surrendering a policy to take the money out. Before deciding, let's understand what surrendering is and what has to be weighed.
What surrendering means
Surrendering is asking to cancel a life insurance contract before its term, with the insured receiving back the surrender value stated in the policy value table — the value accumulated from the premiums already paid, under that plan's conditions.
The amount may be less than the premiums paid
What should be known is that the surrender value in the early years is usually less than the total premiums paid, because part of the premium has already gone towards the cover and the administration costs. The longer the policy is held, the higher the surrender value becomes, according to the specified table. The actual figures are in the policy value table of the policy you hold.
What disappears along with the surrender
Beyond the money, don't forget that surrendering ends the cover immediately. If you want insurance again in future, the premium is calculated on your greater age and you must pass medical underwriting again, which may be harder if your health has changed. There may also be consequences for the tax deductions previously claimed, which can have to be repaid if the policy is surrendered before the period the law specifies [check the latest information].
Other options before deciding to surrender
If the main reason is that the premium is unaffordable, consider the other options first: paid-up value, extended term, or a policy loan. These keep part of the cover in place without cancelling the whole contract.
In short
Surrendering is not wrong, but it should be a fully informed decision. Open the policy value table, compare the options you have, and talk to your agent or the company first, to be sure it really is the right answer for your situation.