Surrendering an Insurance Policy

Surrendering an insurance policy is really a big decision to make. Lots of people have asked me about surrendering policy and my opinion on it since they have found better insurance to take care of their needs compared to their current policy. Let me make it very clear that as an insurance agent, advising customers to surrender their existing policy is non-ethical and should not be condoned. 

If you ever decided to surrender your policy and sign-up for new ones, make sure you are really well informed and you do it on your own accord and not forced by agents out to make quick bucks. Among important terms that you should understand are:
  • Waiting period especially for medical insurance
  • Incontestability period

If you decided to surrender your policy, make sure your timing is also right. My suggestion would be for you to surrender provided that you have other insurance protection especially medical either from your employer or from your other policies. If you don't have any other coverage, do seriously think about the consequences in case anything happens to you during the transition period. 

When to consider surrendering a policy and sign up for new ones? There's no right or wrong answer. But if you happen to be in these conditions, maybe you should think about it. 
  • Non-meaningful coverage. Example of this is such as having a medical plan of Room & Board of RM100 and below per day. It's unlikely that you can get warded for RM100 and below per day nowadays. So in case you are warded, you'll definitely have to fork out your own money. It's really time to upgrade. 
  • Policies with co-insurance or co-takaful. It's quite common for older policies to have cost sharing clause between insurance company and customers. Having this type of policies is not entirely a bad thing. This type of medical card tends to be cheaper compared to those without co-insurance or co-takaful. But if found that those medical card without co-insurance or co-takaful cheaper than those with it, then you might want to consider changing. 
Besides that, these are the people who should not ever consider surrendering their existing policy:
  • You have made major claims from your current policy. Changing policy might result in your existing illnesses not covered under your new policy. It's really pointless to change policies. 
The best advice of all would be to have at least two (2) medical policies in your lifetime. If affordability is not an issue, try avoiding surrendering any of your insurance policies. From time to time, do policy review exercise to determine whether your insurance coverage are adequate. 

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