At a time when experts have been constantly promoting the idea of maintaining separate plans for investment and insurance as the combined plans do not provide enough returns to set off inflation, you may well find yourself invested in some unwanted endowment plans or otherwise underperforming ULIPs. So what option serves you best is detailed here:
Before getting on to discuss the two available options, let's first understand what a paid-up policy is?
Paid-up option enables the policyholder to continue enjoying the benefits of the policy until maturity without the requirement to pay any further premiums towards the same. This said the policy remains in force with lesser benefits and investor doesn't lose much.
After a surrender value for the conventional policy is attained after 2-3 policy years or 5-years in case of ULIPs, a paid up option can be chosen.
Here in despite the options available to you, policyholder needs to factor in the holding period of the policy as well as policy term.
Know which decision will suit the policyholder
Experts suggest that if there is a long time to policy maturity and the premium is not high with surrender charges acceptable to you then you can proceed with surrender. Else in the other case when the time to policy maturity is only few years hence then continue or in the other condition when the time gap falls in between the two circumstances provided, convert the policy to a paid-up.
How to convert insurance policy to a paid-up policy?
If you after considering other options, decide to convert the policy into paid-up to get the paid-up value at maturity, you can either approach the insurance agent or your insurer branch. Also, in case the policy premium is not paid for two consecutive years, it on an automatic basis gets converted into a paid-up plan.
On the other hand, if you do not find policy benefits serving your insurance needs, you can surrender the policy. And remember that you get back 75% of the premium paid in case you apply for surrender after paying for quite some time towards the policy else you get just 30%.