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Cancelling a Savings or Life Plan: Surrender Values
You can usually cancel a savings or investment-linked life plan, but in the early years you may get back far less than you paid. Understand the surrender value and the alternatives before you decide.
"I have paid into my savings plan for two years. Should I stop?" Questions like this appear again and again on expat forums in the UAE. The short answer is that you can usually cancel, but the cost of leaving depends heavily on where you are in the plan's surrender period. In the early years, the amount you receive, called the surrender value, can be much lower than the premiums you have paid, and sometimes very little. Later in the plan, the gap often narrows. So the decision is not only "stay or go". It is about comparing what you would get today, what it costs to continue, and whether there is a middle path such as reducing or pausing premiums.
This article is educational, not a personal recommendation. The right choice depends on your plan's terms and on a review of your wider finances.
What a surrender value is. When you surrender a savings or investment-linked life plan, the insurer pays you the value of your units, minus any charges that apply on exit. During the initial period of many regular-premium plans, a large share of the plan's early charges has not yet been recovered by the insurer, so an exit charge or a reduced value applies. This is why the surrender value can look disappointing compared with the premiums paid.
Why early exits cost more. Many plans are designed around a long commitment. Set-up costs, including adviser commission in some designs, are spread across the term and recovered through charges. If you leave early, those costs are still due, and they come out of your plan value. Your documents should explain how this works and how long the higher-cost period lasts.
Pure protection is different. A term life policy without a savings element usually has no surrender value at all. If you stop paying, the cover simply ends and you get nothing back, which is normal for that kind of policy. The real question with term cover is whether your family would still be protected without it.
Find out where you stand. Before deciding anything, ask the insurer or your adviser for:
- The current surrender value, in writing.
- The fund value before exit charges, so you can see the cost of leaving now.
- When the initial or surrender period ends, and how the value is expected to change after that date.
- The charges you will keep paying if you stay.
- Any life cover or other benefits that will end if you cancel.
Options other than full cancellation. Depending on your plan, you may be able to:
- Reduce your premium, if the plan allows a lower level after the initial period.
- Take a premium holiday, pausing payments for a while. Check whether charges continue to be deducted during the pause.
- Make the plan paid-up, meaning you stop paying but leave the existing value invested. Charges usually keep running, so look at the long-term effect.
- Take a partial withdrawal, if allowed, rather than surrendering everything.
- Switch funds, if the real concern is the investments rather than the plan itself.
None of these is automatically better. A paid-up plan with ongoing charges can still erode over time. Surrendering locks in a loss but frees your money and stops future charges. The comparison only makes sense with your actual numbers in front of you.
Do not lose protection by accident. If your plan includes life cover or other benefits that your family relies on, arrange replacement cover before you cancel, not after. New cover depends on your age and health at the time of application, so check you can get it first.
Questions to ask yourself:
- Do I need this money soon, or can it stay invested?
- Can I comfortably afford the premiums for the rest of the term?
- Would the remaining charges be acceptable if I stayed?
- Am I reacting to a short-term market fall or to a long-term problem with the plan?
- Am I planning to leave the country, and does that change anything?
If you recently signed, check your cooling-off period. Many policies allow you to cancel within a short window after the start date and receive a refund under the terms of the policy. The length and conditions are in your documents, so read them quickly if you are still within that window.
Get the decision in writing. Whatever you decide, ask for confirmation in writing, including the amount you will receive, the date, and what happens to any cover. Keep copies of all correspondence.
Leaving a plan is sometimes the right move, and sometimes staying is the lesser cost. If you would like help reading your surrender figures and comparing your options calmly, ONE Insurance Brokers offers a complimentary first consultation in Dubai or Beirut. We usually reply within one business day.
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- Savings Plans in the UAE: 10 Questions Before You Sign Whether a UAE savings plan is a good idea depends on its charges, how long you can keep paying and when you may need the money. Ask these ten questions before you sign, not after.
- Your Bank Is Offering Insurance: What to Check First Banks often sell insurance and savings plans on behalf of insurers. Before you agree, check whether the product is really required, who provides it and how it compares with alternatives.
- Term Insurance for NRIs in the UAE: India or UAE Policy? Indian professionals in the UAE can buy term cover from an Indian insurer or from an insurer that issues policies in the UAE. The right choice depends on where your family lives, which currency it will spend, and where you expect to be in ten years.
Frequently asked questions
Can I cancel my savings plan in the UAE?
In most cases yes, but you may receive a surrender value that is lower than what you paid, especially in the early years. Your policy documents explain the exit terms.
Why is my surrender value so low?
Many regular-premium plans spread their set-up costs over a long term. If you leave during the initial period, those costs are recovered from your plan value, which reduces what you receive.
What does making a plan paid-up mean?
You stop paying premiums but leave the existing value invested in the plan. Charges usually continue, so check how they would affect the value over time.
Will I get money back from a term life policy if I stop?
Usually not. Pure term cover has no savings element, so if you stop paying, the cover ends without a refund. Make sure your family is protected another way first.
Should I take new cover before cancelling?
If your plan includes life or illness cover that your family relies on, it is safer to arrange replacement cover first, because new cover depends on your health and age when you apply.