How to unlock 15% returns from old life insurance plans

From assignment to loan against policy, insuretechs offer better options for policyholders

- Aprajita Sharma

Running a life insurance plan requires long-term commitment. When paying premiums becomes difficult, policyholders surrender their policies, ending their life cover. A couple of new-age insure-techs have found an alternative using an old provision: Section 38 of the Insurance Act, 1938.

The section allows one-time assignment, where a policyholder transfers it to an entity or person for a payout equal to surrender value. The death benefit continues, partly based on the agreement between assignor and assignee. Aceso Endowment Services and ValuEnable focus on traditional life policies, while Policy Exchange targets Ulips.

How it works Rahul Mali from Nashik wanted to exit one of his LIC traditional life insurance policies. His brother told him about policy assignment, a common practice abroad. Mali approached Aceso Endowment Services. "They quoted me nearly the same payout as LIC did in surrender value. Had I surrendered it via LIC, I would have had to visit my home branch physically. Aceso did it all online, and I got the money within 24 hours," he said.

In Ulips, the surrender value is the fund value minus charges. If premiums stop before the five-year lock-in ends, the fund value moves to a discontinuance fund and earns basic interest—accessible only after the lock-in.