Penalty on early surrender of a life insurance policy

A few people have told me that they bought a life insurance policy from an agent at a "road show".

The agent told them that it is a savings plan, but did not tell them that the policy is a long term contact and they would suffer a large loss in their savings when the policy is terminated or surrendered during the first few years. They were shocked that it would take more than 10 or 15 years for the policy to "break even".

Some young agents were probably not aware about this feature, or they were trained not to tell the prospective policyholders about it, as the policyholders would avoid buying the policy.

Most policyholders were sought my advice were quite clear in stating that they were not told about the loss on surrender, but they felt shy that they did not read the benefit illustration which stated this fact. They wished that they had been more careful before signing on the dotted line.

I wonder if these policyholders who now cry foul are the majority or just a small minority? If you were told about the surrender loss and bought the policy willingly, then you are properly advised. If this was not told to you at the point of sale, then the agent had not been fair to the customer.

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