Should I let the policy lapse or surrender it?

Question

I hold 2 policies: an endowment and a whole life policy. I have bought these policies for about 1.5 year already. Now, I realized the higher costs are not justifiable and like to terminate these policies and switch to a term policy.

I called up and spoke to my agent (I did not send her any written notice) about terminating these policies and she strongly advised me to let the policies lapse rather than surrender immediately.

Is there any 'catch' I'm unaware of when letting the policies lapse, as compared to surrendering them immediately?

Answer 1

Well, it's highly unlikely that you have a "surrender value" that exceeds the "surrender fee". So I'd double check with the agent, and ask how much will it cost to surrender the policy? And do whichever is cheaper.

Answer 2

Call up the customer service number and ask for an "inforce illustration" with no more premiums going into it. This will tell you how long the policy will take to lapse if you just let it go. It should also say something to the effect of "cash surrender value" which is the amount you would walk away with if you surrender it. Once you have that information, you should be able to make a good decision.

It's unlikely that there is a chargeback after 1.5 years, but it would probably count against her persistency ratio.

Answer 3

It will depend on the kind of policies you have, however I would recommend surrendering the policies.
The reason is this: If any of the policies have created cash value, you are entitled to take that money off, when you surrender them. I have seen some policies with clauses that let the company deduct your premiums form the cash value in the event you fail to pay your premiums. I can not tell if your policies have this clause, but I would play it safe and surrender both.
Just remember, being 18 months old, there might be some cash value but if it is, it's probably going to be very little.

Answer 4

The reason an honest agent would recommend this is that the policy still has surrender charges, and if surrendered, no cash is payable. However, if you stop paying premiums the policy will stay in force until the "account value" runs out.

Answer 5

Here is a 2 step program:

1. Find a new agent, and

2. get approved for new coverage for term insurance or low cost universal life. After you have the new coverage in force, stop premium payments on the old ones.

Answer 6

Only surrender your policies if there is residual cash value.

But B4 u do any thing make sure you have life insurance coverage either term or whole life during this period of time. dun expose your self without any coverage.

if you plan to switch to term life get your agent to arrange the new plan b4 any termination.

Answer 7

Yeah, the chargeback on her commission mostly. Get a new agent.