The period of an insurance policy is generally based on the goals that the policy is purchased to achieve. The question ‘can you surrender a term life insurance policy’ often pops up when as well. For example, the goal of a term insurance plan is to replace the income flow so you can have yourself covered until your retirement. You can also shorten the tenor of your term insurance policy if you feel that your liabilities can well be settled before your retirement, liabilities such as a mortgage, a marriage loan or education loan (not all brands provide this)

Surrendering a term policy

If you want to surrender your term insurance policy, you will have to initiate it through your insurance service provider. The insurer then will calculate the surrender value which is to be paid to you. The surrender value will be lesser than the premiums that you have paid for the policy. Can you surrender a term life insurance policy? Yes, you can! But with that, the value of the policy is bound to decrease.

The sum which the insurance company pays to you after you surrender the policy is called the cash surrender value. It is applied is the insurance policy is terminated voluntarily if the event which is insured takes place before the maturity of the policy. Several policies come with a guaranteed surrender value, which is the amount which is guaranteed to the policyholder if the policy is terminated voluntarily before maturity. The surrender before maturity, however, attracts a penalty.

The Insurance Regulatory and Development Authority of India (IRDAI) fixes the surrender value for the insurance for the initial seven years. Onwards from the seventh year, the surrender value comes at the discretion of the insurance provider, but only after consulting it from the policy regulator.

From the third year, the surrender policy is up to 30 percent of the paid premium; between fourth and the seventh year, the surrender value falls up to 50 percent. The rule of the thumb is this that the closer you are to your date of maturity at the time of your exit, the higher is the amount that you receive on the closure.

It is best to contact the insurance company to know the exact surrender amount of your term insurance policy.

Things to ensure before you stop your policy

Before you exit a policy and take the decision on ‘can you surrender a term life insurance policy’, one of the things is to ensure is that you have sufficient life cover . It is advisable to get a term cover for 10 which makes for at least 10 times of your annual income. It acts as a tool to replace income for your family in case you are not around. After you get this policy, you can keep on reviewing it to adjust it for the long term financial goals that you might have in mind, such as the education of your children.

It is quite important to have a life cover which is adequate for all your financial needs and goals, and also provides high inflation-adjusted returns on your savings so that you have a sizeable corpus over time.


Future Generali Flexi Online Term Plan comes with basic life cover and increasing income protection. This option provides the dual benefit of lump sum payout in the event of death, as well as an increasing tax-free monthly.

Future Generali basic life cover comes with affordable premium which starts with Rs 4,983 per annum, life cover up to 75 years of age, and multiple death benefits option. It also has lower premium rates for women and enables tax saving.