Smart things to know about Surrender value
Surrender value is the amount an insurance firm pays a policyholder if he opts for voluntary termination before the policy’s maturity or occurence of the insured event.
Updated:
Surrender value is the amount an insurance firm pays a policyholder if he opts for voluntary termination before the policy’s maturity or occurence of the insured event.
It is that part of the premium payment which goes into an investment account and earns a return. It is also known as ‘cash value’ or ‘policyholder’s equity’.
Surrender values are available in investment-cum-insurance policies, such as endowment plans, money-back plans and Ulips, since they originate from the investment component.
The surrender charges applicable for the first four years have been fixed by the Irda and are computed as a fixed percentage of the annual premium or fund value, whichever is lower.
Surrendering a policy is not recommended, especially in early years, since the cash value of the policy may not have grown in value in a limited time and, therefore, may be in the negative.
Policyholders can take a loan on insurance policy against the surrender value. Insurance companies certify the amount of surrender value.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL).
It is that part of the premium payment which goes into an investment account and earns a return. It is also known as ‘cash value’ or ‘policyholder’s equity’.
Surrender values are available in investment-cum-insurance policies, such as endowment plans, money-back plans and Ulips, since they originate from the investment component.
The surrender charges applicable for the first four years have been fixed by the Irda and are computed as a fixed percentage of the annual premium or fund value, whichever is lower.
Surrendering a policy is not recommended, especially in early years, since the cash value of the policy may not have grown in value in a limited time and, therefore, may be in the negative.
Policyholders can take a loan on insurance policy against the surrender value. Insurance companies certify the amount of surrender value.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
Related Articles
Insurance terms explained: What is surrender value, types of surrender value2024-10-28T01:00:00Z- Increase in surrender value to reinforce customers' faith in life insurance industry: Kotak Life Insurance MD & CEO2024-10-28T01:00:00Z
- Premium may rise, agent commission could decline as revised surrender value kicks in from Tuesday2024-09-30T14:35:16Z
ADVERTISEMENT
