Why Surrendering Your Life Insurance May Be Costing You More Than You Think
Life changes in retirement. Your kids are grown, your mortgage may be paid off, and you might be looking for ways to reduce expenses. For many, that includes rethinking old life insurance policies – especially if it is no longer needed or has become difficult to maintain – and considering surrendering them back to the insurer for cash.
But before you cancel, it’s worth asking: is surrendering really your best option?
What Does “Surrendering” a Policy Mean?
When you surrender a life insurance policy, you cancel it and take the cash surrender value (CSV). This is usually just a small portion of what the policy is actually worth. You lose your coverage, and your beneficiaries receive nothing when you pass.
Most people assume surrender is the only choice. But that’s not always true.
Why People Choose to Surrender
● Premiums feel expensive in retirement
● The policy no longer seems necessary
● Quick cash feels helpful
● They don’t know alternatives exist
Unfortunately, surrendering often means you get far less than the fair market value of your policy. In most cases, significantly less than what you paid in premiums over the years.
Another Option: Life Settlements
Instead of surrendering, some Canadians qualify for a life settlement. This means selling your life insurance policy to a third party for more than the surrender value. It is an option worth exploring if you no longer need your coverage.
A life settlement can typically offer a much larger sum than what the insurer would pay out in the case of a policy surrender. This would also relieve you from any future premium payments.
Know Before You Cancel
You’ve paid into your policy for many years. Before walking away, take a moment to ask:
● What is my policy really worth
● Are there options besides surrender
● Could this policy help fund my retirement
Taking time to review your policy can help you make a smarter and more confident decision.
Are you considering a life settlement for your life insurance policy? Wondering if you’re eligible to sell your life insurance policy? Learn more about selling your policy and find out if you qualify for a life settlement by contacting the experts at Canadian Life Settlements today.
