What is Surrender Value in Insurance?

If a policyholder decides to end the policy before it matures, he is liable to receive a certain sum that has accrued as his saving.

What is Surrender Value?

Surrender value is the amount that a policy holder receives from the insurer in case he plans to terminate the policy before its maturity.From this amount the insurer deducts the surrender charge and the remaining is transferred to the policyholder.

A regular premium policy acquires guaranteed surrender value after the policyholder has paid the premiums continuously for three years if the premium paying term is 10 yrs or more. For policies where premium paying term is less than 10 yrs, policy acquires guaranteed surrender value after 2 years premiums have been paid. When an individual decides to terminate his policy, all the benefits attached with it cease to exist, including the life cover. Therefore, the policy holder should only terminate the policy if he feels that it no longer fulfils the requirement or if he realizes that the policy was sold with false promises. All kinds of insurance policies do not acquire surrender value. Only those policies which contain an embedded savings component like endowment plans and ULIPs acquire a surrender value or plans where a single premium is paid for a longer term cover. Regular premium paying pure protection plans with no savings element do not have a surrender value and such plans result in only lapse of policy.

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