How to Terminate a Life Insurance Policy

Life goals and financial needs can change over time, and sometimes policyholders decide to end a life insurance policy before its original maturity. Understanding how to terminate life insurance policy responsibly helps you make decisions that align with your financial priorities while minimising losses and ensuring clarity about what you may receive when you exit a plan early.

Terminating a life insurance policy is not the same for all plans, the process and financial implications vary based on the type of policy you hold and how long you have been paying premiums. 

What Does Policy Termination Mean?

Policy termination refers to ending your life insurance contract before it reaches maturity or before the insured event occurs. Unlike letting a policy lapse by missing premiums, termination is a formal process where you actively choose to exit your contract, often by surrendering the policy for its surrender value or cancelling it within a free-look period.

Termination can happen for several reasons:

• Your financial goals have changed
• You no longer need the coverage
• You want to free up funds for other priorities
• The policy no longer fits your financial plan

It’s important to assess how this affects your protection, savings, and long-term plans.

 How to Terminate Your Life Insurance Policy

1. Check Your Policy’s Terms and Lock-In Period

Many life insurance plans, especially traditional ones such as endowment or ULIP variants, build up a surrender value, an amount payable if you terminate your plan early. However, surrender value is typically available only after a certain period (often 1-3 years depending on the plan).

Term insurance plans generally do not offer a surrender value because they provide pure protection for a fixed term.

 2. Understand Surrender vs Cancellation

• Free Look Cancellation:

If you have recently purchased a policy and decide it’s not right for you, most insurers allow cancellation within a short “free look” period (usually 15–30 days from policy receipt). In this case, you may get a refund of premiums after a small deduction.

• Surrender:

For policies with cash value, surrender means exiting after the lock-in period and receiving the surrender value, calculated based on premiums paid and any bonuses or accumulated value minus charges. Plans without cash value (like most term plans) do not pay a surrender value.

 3. Submit Required Documents

To formally terminate your policy with Shriram Life Insurance, you typically need:

• Your original policy documents
• A signed surrender/cancellation form
• A cancelled cheque or bank details
• Identity proof (Aadhaar, PAN, etc.)
• Updated contact information
  You can submit these at the nearest Shriram Life branch or as directed by the insurer’s customer care team.

 4. Review Surrender Charges and Payout

If surrender value is applicable, your insurer calculates it by subtracting surrender charges from the accumulated value. These charges may decrease the longer you hold the policy. Ending early in the lock-in period may move the policy funds to a discontinued policy account, where they earn a regulated minimum interest until you become eligible for surrender value.