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I hold a Bajaj Allianz New UnitGain policy with issue date 19-Aug-2009. It has an assured value of Rs. 4,08,000 with a policy term of 20 years and Rs. 12,000 annual premium. I have already payed 3 premiums (Total Rs. 36,000). The next premium paymen date is 19-Aug-2012. Since 3 yrs are not completed yet, the policy cannot be surrendered. Seeing the pathetic fund value of around Rs. 23,000 (I was ignorant when the policy was bought), I want to surrender it. I have following questions,

1. Since 3 yrs are not completed yet (will complete on 19-Aug-2012), there is no option to surrender. Should I pay another premiuum of Rs. 12,000 and then surrender? or

2. Do not pay the 4th premium and surrender after 3 yrs are completed. In this case what happens since I have not paid one premium?

I am pretty sure the surrender value wont be much, but I dont want to keep putting money in this black hole anymore. Please Advise

6 Answers

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1 BRSINGH August 10, 2012 at 6:45 pm

Please check with the bajaj allianz what will be the surrender value after 3 years. If the surrender value will be less than 12K then dont pay the 3rd premimum and forget about the policy. I think there will be some paid up option which you can check with the insurer. Your policy gets paid up when you stop paying premimum and you get this amount (along with bonus) back when your policy matures.

So if your surrender value is less then 12K then dont pay the 3rd premimum and get the paid up amount after 20 years :) Something is better then nothing :) But I would like to congratulate that you have figured out your mistake very early.

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2 Ashal Jauhari August 11, 2012 at 1:34 am

Dear Raja, please check your policy papers & read there for surrender charges.

Thanks

Ashal

Reply

3 Raja August 12, 2012 at 1:50 pm

Thanks for the responses. I am yet to locate my policy document, but I found the policy details online as well,

http://www.insurance-in-india.com/bajaj-allianz/new-unitgain.html

The Non-Forfeiture clause is as follows,

————-
If any due regular premium is not paid within the grace period in the first 3 policy years, the policy shall immediately lapse for the insurance cover including additional rider benefits, if any. However, during the period of lapsation, the policy shall continue to participate in the investment performance of the underlying funds, subject to deduction of all charges except mortality charge and rider premium charges, if any.

You may revive the policy within a revival period of 2 years from the due date of the first unpaid regular premium, subject to recovery of any due but unrecovered charges except mortality charge and rider premium charge, if any, from the due date of the first unpaid premium, failing which the policy shall be terminated and the Fund Value as on the date of termination, less surrender charge, shall be paid at the expiry of the revival period or at the end of the third policy year, whichever is later.

If all the due regular premiums have been paid for at least the first 3 consecutive years and subsequent premiums are unpaid, you will be given an opportunity to revive the policy within 2 years from the due date of the first unpaid premium. During this limited period of revival, the policy shall continue for full insurance cover including additional Rider Benefits, if any, (except UL WOP, if opted for) levying all appropriate charges by cancellation of units at the prevailing unit price till the Fund Value in respect of regular premium less surrender charge, if any, does not fall to an amount equivalent to one annual premium (NAV) across all the funds.

At the end of 2 years, i.e. period of revival, if the contract is not revived, you can opt to continue the policy with full insurance cover including additional Rider Benefits, if any, (except UL WOP, if opted for), subject to deduction of all charges till the Fund Value in respect of regular premium less surrender charge, if any, does not fall to an amount equivalent to one annual premium (NAV) across all the funds.

When the Fund Value in respect of regular premium less surrender charge, if any, falls to an amount equivalent to one annual premium or you do not opt to continue the policy after the revival period, the policy shall be terminated by paying the Fund Value as on date of termination less surrender charge, if any.
———–

My understanding is that If I don’t pay this years premium, the insurance cover will lapse (which I don’t care) but my unit linked investment will continue. Once 3 yrs are completed on 19th Aug, I will be able to surrender the policy minus the surrender charges (not mentioned how much but from the internet it looks like it may be approx 50% of the first yr premium). Not sure if they will also deduct one year premium which was was not paid.

So does it make sense to pay this yrs premium and then surrender it after Aug 19th or not pay the premium and then surrender?

Reply

4 BRSINGH August 12, 2012 at 1:58 pm

Raja, The simple answer is check with your insurer about the surrender value. If its less than 12K then dont pay premimum and forget about the policy. If there is somethin called paid up option then go for it. Please check with the insurer.

Reply

5 Raja September 6, 2012 at 4:52 pm

Surrender charges after 3 yrs are 33.3% of the first year premium. i.e. surrender charges are Rs. 3996. The fund value is currently Rs. 23586 and after surrender charges I would get back approximately Rs. 19500. I did not pay the 4th premium of Rs. 12000.

I have already incurred a loss of approx Rs. 12400 from the 3 premiums I have paid and if I surrender it now the loss increases to approx Rs. 16400

If I pay another premium, By the end of another year Rs. 2400 would have been deducted under various charges (assuming same NAV as today) and I would be left with approx Rs. 33200. In this case the loss would be Rs. 14800 and at a surrender charge of 25% the surrender value would be approx Rs. 29600 giving me a loss of Rs. 17800

This is assuming NAV remains the same. There is every possibility of it going up or down, but even if it increases, the benefit doesn’t look to be much in the short term. Surrender charges are 0% only after 10 yrs.

I think it would make sense to immedietly surrender the policy without paying the 4th premium. Do you agree?

Reply

6 Ashal Jauhari September 6, 2012 at 5:07 pm

Dear Raja, Just do it now. Surrender it immediately.

Thanks

Ashal

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