SURRENDER VALUE OF INSURANCE
Ashish Gupta, December 13, 2009 The Economic Times (Delhi edition)
Surrender value is the sum of money an insurance company will pay to the policyholder or annuity holder in the event of his policy being voluntarily terminated before its maturity or the insured event occurring. This cash value is the savings component of most permanent life insurance policies, particularly whole life insurance policies. This is also known as 'cash value', 'surrender value' and 'policyholder's equity'.
Surrender value is the amount payable to the policyholder should he decide to discontinue the policy and encash it. It is payable only after three full years' premiums have been paid to the insurance company. Moreover, if it is a participating policy, the bonus gets attached to it.
Surrender of policy is not recommended since the surrender value will always be proportionately lower.
If you decide to go in for another insurance policy at this stage, it will come at a much higher premium because your age will have advanced since taking the earlier policy. Therefore, retention of earlier policies and continuing all policies without allowing them to lapse is the best strategy.
Surrender value is what an insurance company will pay an insured, after charges are deducted, if he terminates or surrenders the policy before the original maturity date. The life cover provided by a life insurance policy ends with its surrender as it effects a termination of the contract between the insured and the insurer. On surrender, the insured basically gets the fund value of his investments minus the charges that the insurer levies on account of premature termination.