Did you know that you can actually sell your insurance/endowment policies, for cash, even though they’re not matured yet? Yes, you read that right!
There seems to be a trend of people selling their insurance policies for various reasons. Some do not want to wait that long for the policy to mature, some need the cash urgently while others can no longer commit to the premium amount set aside.
There are companies that buy these policies at a slightly higher price compared to the surrender value – but is selling your policy the only way out?
Here are four points to consider before selling your policies:
1. Go back to the original objective of buying that policy.
Whenever we purchase a policy, there would have been a purpose at that point. Was it for protection against critical illness, or to instil discipline to save a fixed amount regularly? Unless you bought a policy on impulse, which is rarely the case (nobody wakes up thinking “I must get a policy today”), often times these policies serve us a purpose. By giving up the policy now, are we losing something in the long run?
2. Don’t be tempted by the short-term gain.
Yes sure, selling the policy now might give you instant access to a couple of hundreds or thousands, depending on the type of policies – but that money will be gone in no time if it was sitting in your bank. Good things take time, so be patient and wait to see your endowment policy mature.
3. Do you really need the money?
Are you thinking of selling your policy in exchange for that new car/bag/ (insert latest material item)? Sometimes the impulse wants to take over our rational mind, especially nearing festive and holiday seasons.
4. If you can’t pay the premiums, speak to your financial advisor.
Most policies allow you to take some form of premium loan or premium holiday. In the event that you are unable to finance your policy, talk to your financial advisor. There are many ways to solve the situation and selling/surrendering your policy should be the very last option considered. The last thing you want is to give up a policy that serves a major purpose and be caught flat-footed when disaster strikes.
Buying a policy is a long-term commitment and you should understand the benefits of the policy and be comfortable with the amount set aside to fund the policy.
While selling your policies might bring you better value compared to surrendering your policies, the real question you should ask yourself is whether selling your policy is the right thing to do.
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