Surrender value life insurance


If one plans to surrender a life insurance policy how is the surrender value determined?


The insurance company decides on the final surrender value of your policy depending on the age of the policy, its total duration and the number of premiums paid by you. If your policy was in the early stages the surrender value can be as low as 30% of the premiums paid by you. If the policy was at the end of its tenure the surrender value grows gradually higher and can go as high as 80% of your premium paid.


Hi Dhyan,

The cash surrender value is the amount of cash a policyholder gets from the Life Insurance company if he/she actually surrender/cancel a life insurance policy before its maturity or becomes payable by death . This amount is net of any surrender charges and outstanding policy loans and interest thereon.
The cash value of the policy builds up with time. It continues to increase as long as the policy exists. The other feature is that as the value of the policy grows, it is possible to borrow or take loan on the cash value or take a loan keeping the policy as collateral to obtain a secured loan. So having a policy could help you take up a personal loan or mortgage loan by either keeping the policy as collateral or by the surrender cash value of the policy.

Cash surrender value is never the face value of any life insurance coverage. The face value of the policy is the amount that will be paid out to beneficiaries if the terms and conditions of the policy are met. Cash surrender value is payable to the insured at the time of cancelling insurance policy coverage is done. This will be considerably less than the face value. For endowment policies, surrender value will be the paid-up value. This is usually calculated by multiplying the policy’s sum assured with the ratio of the number of premiums paid to the number of premiums due.

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BB Expert