Surrendering a Jeevan Anand policy is generally not advisable due to the significant financial losses incurred, especially in the initial years of the policy term. While it offers a way to retrieve some money, the amount received is typically far less than the premiums you have paid.
Understanding the Surrender Value
When you surrender a Jeevan Anand policy, you receive a "Surrender Value." This value is calculated based on specific terms and conditions.
- Guaranteed Surrender Value (GSV): Your Jeevan Anand policy can only be surrendered after it has been in force for at least three full years. The Guaranteed Surrender Value is calculated as 30% of the total basic premiums paid, excluding the premium paid for the first year. Additionally, any extra premiums paid and premiums for riders like the Accident Benefit are also excluded from this calculation. This means you will receive a very small fraction of the money you've invested.
- Special Surrender Value (SSV): In addition to the GSV, a Special Surrender Value might be applicable, which could be higher than the GSV. This value is determined by the insurer based on the policy's duration, bonuses accrued, and other factors, but it is still often less than the total premiums paid.
Example Scenario (Illustrative)
Let's consider a simplified example for the Guaranteed Surrender Value:
| Policy Year | Annual Basic Premium | Total Premiums Paid | GSV (Approx. if surrendered in this year) |
|---|---|---|---|
| 1 | ₹20,000 | ₹20,000 | ₹0 (Not eligible for surrender) |
| 2 | ₹20,000 | ₹40,000 | ₹0 (Not eligible for surrender) |
| 3 | ₹20,000 | ₹60,000 | ₹12,000 (30% of ₹40,000 (Year 2+3 premiums)) |
| 4 | ₹20,000 | ₹80,000 | ₹18,000 (30% of ₹60,000 (Year 2+3+4 premiums)) |
Note: This table is a simplified illustration. Actual surrender value will depend on the exact policy terms, accrued bonuses (if any for SSV), and the specific year of surrender.
Why Surrendering is Generally Not Recommended
Surrendering your Jeevan Anand policy comes with several drawbacks:
- Significant Financial Loss: As seen, you recover only a fraction of your invested capital, especially in the early years. The difference between premiums paid and the surrender value represents a direct financial loss.
- Loss of Life Cover: The primary benefit of a life insurance policy is the financial protection it offers to your dependents. Surrendering immediately terminates this crucial life cover, leaving your loved ones without the promised financial security.
- Forfeiture of Accrued Bonuses: If your policy has accumulated bonuses, surrendering it might lead to a loss or significant reduction of these bonuses, which would have otherwise added to your maturity or death benefit.
- Loss of Maturity/Survival Benefits: Jeevan Anand is an endowment-cum-whole life plan. Surrendering means you forfeit the guaranteed lump sum maturity benefit and the lifelong risk cover that continues even after maturity.
- Loss of Tax Benefits: Premiums paid for life insurance policies like Jeevan Anand are typically eligible for tax deductions under Section 80C of the Income Tax Act. Surrendering the policy prematurely (before 2-5 years, depending on the type) can lead to the reversal of previously claimed tax benefits or even make the surrender value taxable.
Alternatives to Surrendering
Before deciding to surrender your policy, consider these more financially prudent alternatives:
- Make the Policy Paid-Up: If you are unable to pay future premiums, you can request the insurer to make your policy "paid-up." This means the policy will continue with a reduced sum assured, based on the premiums already paid, and no further premiums will be required. You retain some life cover and might still receive a reduced maturity benefit.
- Take a Policy Loan: If you need immediate funds, you might be eligible to take a loan against your policy. The policy continues to be in force, and you can repay the loan at your convenience, allowing the policy benefits to remain intact.
- Revive the Policy: If you have missed a few premium payments, most policies have a revival period during which you can pay the arrears with interest and continue the policy as usual, reinstating all original benefits.
- Review Your Financial Goals: Understand why you feel the need to surrender. Is it a short-term cash crunch, or has your long-term financial plan changed? Exploring other financial adjustments might be more beneficial than forfeiting your insurance benefits.
In conclusion, surrendering a Jeevan Anand policy should be a last resort. It's crucial to thoroughly evaluate the financial implications and explore all available alternatives to minimize losses and ensure continued financial protection.
