Where a Surrender Cost Index is described in a Term Life Insurance Policy does it mean the policy owner must pay to cancel the policy?

Answer 1

The Surrender Cost Index can be used, as one factor, to give the buyer a convenient way to compare relative costs of similar policies. They take into account a number of variables. This index is generally not helpful in comparing term life policies, as the majority of term policies do not have a cash value or a surender value.

In evaluating policies with a cash value and a surrender value, the general rule is that the smaller cost index is the better buy. Cost comparisons should only be made between similar life insurance plans. Those policies should provide the same basic benefits and require roughly the same premiums for the same amount of time. The more identical the policies are, teh more reliable the cost comparison will be. It is also important to note that you should compare index numbers only for the kind of policy for your age and the amount you should buy. No one company offers the lowest cost for all insurance, at all ages. If there is only a small difference between index numbers, consider other features when making your choice including service.

Life insurance cost indexes apply to new policies. You should not use them to determine whether to drop an existing policy.