If the policyholder does not get all the benefits associated with the insurance plan, then he can surrender the life insurance policy. This could be because he is not able to meet the commitment period of the policy and is not able to pay the fixed premium charged by the insurance company to avail the benefits of the plan. To avail the benefits on surrender of the policy, the policyholder has to go through the surrender process as decided by the insurance company and pay the surrender charges. This may differ from insurer to insurer. So if you surrender a policy in the medium term, you will get a sum (surrender value) of the amount allocated for saving and earning. Apart from this, a surrender charge is also deducted from this amount, which varies from policy to policy.
Surrender value is the amount that a policyholder takes from the life insurer when he decides to discontinue a policy before its maturity period. Suppose the policyholder decides to surrender mid-term, in which case the amount allocated for earning and saving will be given to him/her. From this, surrender charge is deducted depending on the policy.
What are the types of surrender value
There are two types of surrender value
Guaranteed Surrender Value and Special Surrender Value
guaranteed surrender value
The Guaranteed Surrender Value is given to the policyholder only after the completion of three years. This value makes up only 30% of the premium paid for the plan. Also this does not include premiums paid for the first year, additional costs paid for riders and bonuses (you can get).
Special surrender value
To understand this, first of all it is necessary to know what is paid-up value. Suppose the policyholder stops paying premiums after a specific period, then the policy will continue, but at a lower sum assured called paid-up value. The paid-up value is calculated by multiplying the Basic Sum Assured by the quotient of the number of premiums paid and the number of premiums payable. On discontinuing the policy, you get a special surrender value, which is calculated as the sum of the paid-up value and the total bonus multiplied by the surrender value factor.
What is charge
The fee is deducted at the time of surrender of the policy and the balance amount is paid to the policyholder.
What do the documents look like
A policy surrender request has to be filled and submitted to the insurance company. Original policy document, a canceled check and a self-attested copy of KYC documents must be attached with the application. The reason for surrender may also have to be mentioned in the form. Once the surrender application is submitted, it is processed within 7-10 working days.
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