How much can one get as a surrender value of the policy if it is near end of tenure?
It is hard to give out a figure without knowing the details of your insurance policy and how far or close the tenure date is. the surrender value can be as low as 30% of the premiums paid by you in the earlier years but can go to as much as 80% of your premium paid near the end of tenure. It all depends on your insurance plan, the insurance company and your insurance policy.
The surrender value is usually a sum of what has been allocated towards savings and the earnings thereon. From this a surrender charge will be deducted. This varies from one policy to another. As per a recent guideline from the Insurance and Regulatory Development Authority (IRDA), Life Insurance companies have been told not to levy surrender charges if the policyholder has been holding the policy and paying premiums for more than 5 years.
Usually, a regular premium policy will have a surrender value only after the policyholder has paid the premiums for 3 continuous years. If you are opting for a premature surrender of your policy, the overall tax liability will depend on the number of premiums you have paid to the company. If you have paid a minimum of five premiums, you will have no tax liability. On the other hand, if you have not paid this minimum number, then the surrender value of the policy gets added to your total income for that financial year. Depending on your net income including the surrender value, you are then liable to pay income tax as per your income tax bracket.
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