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Surrender Value Calculator

Calculate the amount receivable if you surrender your Life Insurance policies (such as Endowment, Money Back)

What is Surrender Value?

Surrender value is the amount you receive if you choose to terminate your traditional life insurance policy (such as Endowment, Money Back) before its maturity.

How to use the Surrender Value Calculator?

Our Surrender Value Calculator is designed to provide you with a quick and easy way to estimate the surrender value of your endowment policy. Follow these simple steps to get started:

Step 1: Enter Your Policy Details

Policy Start Year

Enter the year when your policy commenced. This is the year you first took out the policy.

Policy Term

Enter the total duration of your policy in years. This is the length of time for which the policy is active.

Premium Payment Type

Select your premium payment type: Regular Pay, Single Pay or Limited Pay. If you opt for Limited Pay, please specify the premium payment term in years, which is usually shorter than the overall policy term.

Last Premium Payment

Choose the year in which you last paid your premium. This helps in calculating the amount you've already contributed towards the policy.

Step 2: Provide Your Cover Details

Sum Assured

Enter the total amount assured by your policy in lakhs. This is the amount your policy guarantees to pay upon maturity or in case of an eventuality.

Annual Premium

Input the total amount you pay each year for your insurance policy

Accrued Bonus

If applicable, input the bonus amount in Rupees that has been added to your policy till date.

Result

Once you've entered all the necessary details, the surrender value calculator will display the following results

Surrender Value

This is the estimated amount you would receive if you decide to surrender your policy now.

Sum Assured

Reconfirms the total cover amount that your policy assures.

Premium Paid Till Date

Shows the total amount of premiums you have paid up to the current date.

Premium Payable

Indicates the remaining premium amount that is yet to be paid.

Still Confused?Talk to a Financial Advisor
Policy details
Cover details
Result
Policy Details
Policy Start YearEnter the year in which your policy commenced
Policy TermEnter the total duration of your policy in years
Premium Payment TypeSelect the premium payment options
Last Premium PaymentEnter the year in which you last paid your premium
Premium Payment Type
Select the premium payment options
Regular PayPay for the complete duration of years
Single PayOne-time lumpsum payment
Limited PayPay for a lesser duration than policy term

Frequently Asked Questions

Does the Surrender Value Calculator calculate the exact surrender value?
While the Surrender Value Calculator of 1 Finance can help you obtain an estimated surrender value of your policy, it's important to note that this is just an approximation. The exact surrender value can only be precisely determined by your insurance provider. They will consider various specific factors related to your policy, including the terms of your policy, the premiums paid, any applicable bonuses, and other policy-specific conditions.
Who can benefit from using the Surrender Value Calculator?
The Surrender Value Calculator is primarily designed for endowment policy holders who wish to estimate the surrender value of their policies. It is also a valuable tool for Qualified Financial Advisors (QFAs) and insurance professionals, aiding in providing accurate financial advice and calculations.
Why is it important to know the surrender value of your policy?
Knowing the surrender value is crucial because it represents the amount you will receive if you decide to terminate the policy before its maturity. This information is vital for financial planning, especially if your financial goals or circumstances have changed since you first purchased the policy. Calculate using the Surrender Value Calculator.
What factors influence the surrender value of an endowment policy?
The surrender value depends on several factors, including the length of time the policy has been in force, the total premiums paid, policy terms and conditions, and the performance of any investment component in the policy. Charges and fees associated with the policy also affect the surrender value.
Is surrendering an endowment policy always a good idea?
Not necessarily. Surrendering an endowment policy should be based on a thorough evaluation of your current financial needs, goals, and alternative investment options. It's advisable to consult with a financial advisor to understand the implications fully.
What are the tax implications on the surrender value?
When you surrender a life insurance policy, the surrender value you receive isn't fully taxed. Instead, you'll be taxed on the difference between the amount you receive and the policy basis, which is the total amount of premiums you have paid into the policy. Essentially, this taxable amount represents the investment gains that you're withdrawing from the policy.
How does term insurance compare to endowment policies?
Term insurance is purely a life insurance product that provides coverage for a specified period. It's generally cheaper than endowment policies and offers a higher cover for a lower premium. Unlike endowment policies, it does not have a savings or investment component.
What is an endowment policy?
An endowment policy is a type of life insurance policy that combines savings and protection. It pays a lump sum amount upon maturity or upon the death of the policyholder within the policy term. These policies are often used for long-term financial planning, like saving for retirement or a child's education.

Disclaimer

The surrender value calculator is designed exclusively to enhance awareness and understanding of potential benefits in the context of surrendering life insurance policies. It is not intended to provide specific financial advice regarding your life insurance surrender decisions. Please consult with a qualified financial advisor for personalised guidance on policy surrender.

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All you need to know about Surrender Value Calculator

Surrendering a Life Insurance Policy: Insights from the Surrender Value Calculator

Surrendering a life insurance policy is a significant decision that involves voluntarily terminating the policy before its scheduled completion date. This decision is made by the policyholder, who can choose to surrender their policy at any point, subject to the terms of the policy. When a policy is surrendered, a few key things happen:

Termination of Coverage

The immediate effect of surrendering a life insurance policy is the cessation of the insurance coverage. This means that the policyholder and their beneficiaries lose the protection offered by the policy, including any death benefits that would have been payable in the event of the policyholder's untimely demise.

Receipt of Surrender Value

In exchange for giving up the policy, the policyholder receives a sum of money from the insurance company. This amount is known as the surrender value. It's important to note that the surrender value is typically less than the total premiums paid or the sum assured of the policy. The exact amount depends on several factors, including the type of policy, the duration for which premiums have been paid, and the terms and conditions of the policy.

Why consider surrendering your endowment policy?

The decision to surrender an endowment policy is not one to be taken lightly. It involves a strategic reassessment of how insurance and investment objectives are being met. A growing school of thought, advocated by many financial experts, emphasises the importance of separating insurance and investment. This philosophy stems from the belief that insurance should primarily serve as a safety net, a means of protection against unforeseen events, while investments should focus on wealth accumulation and growth.

Separation Strategy

The rationale behind this strategy is straightforward yet compelling. Endowment policies, which combine insurance and investment, often offer lower returns compared to standalone investment vehicles due to their inherent structure and associated costs. Moreover, they generally provide less flexibility and transparency in investment choices.

Financial advisors and studies increasingly suggest that individuals can optimise their financial portfolios by segregating these two components. This approach allows for a more tailored and effective financial plan, where insurance provides the necessary protection and investments are selected based on the individual’s risk tolerance, financial goals, and market opportunities.

Term Insurance Advantages

When it comes to pure protection, term insurance stands out. Unlike endowment policies, term insurance is straightforward – it offers significant cover for a relatively low premium with no investment component. This simplicity means policyholders are not only clear about what they are paying for but also get better value for their money in terms of the coverage amount. In the unfortunate event of the policyholder's demise, the beneficiaries receive a substantial sum, which can be crucial for their financial stability.

In essence, the decision to surrender an endowment policy should be based on a thorough analysis of how well it aligns with one’s current financial objectives. For many, the separation of insurance and investment, the clear benefits of term insurance, and the potentially higher returns from other investment vehicles present a compelling case for reconsideration of their endowment policies.

Why does one surrender a policy?

When people decide to give up their life insurance policy before it ends, there are usually a few common reasons behind this choice. Sometimes, they might have been sold a policy they didn't really want or need, which is often due to not fully understanding what they were buying. This is a situation where they might not have had all the right information about the policy when they first got it.

Another reason could be that the policy isn't giving back as much money as expected over the years. These situations show why it's so important to know exactly what you're signing up for and to keep checking if your insurance is still right for you as time goes on.

Dissatisfaction with Policy Features

Over time, your policy might not meet your expectations in terms of coverage, benefits, or flexibility. If this is the case, surrendering and opting for a policy that better suits your needs could be a wise decision.

Change in Financial Circumstances

Life's unpredictability can lead to dramatic changes in financial situations. In cases of severe cash crunches or unexpected expenses like medical bills, surrendering your policy could provide the necessary funds. However, it's vital to balance the immediate financial relief against the long-term benefits you might be losing.

Policy Maturity is Far Off

If your policy's maturity date is far in the future and you have immediate financial needs or find a more beneficial investment opportunity, surrendering might be viable. However, consider the surrender charges and the long-term value you might be forfeiting.

When contemplating surrendering your endowment policy, it's crucial to consider the broader picture of your financial landscape. Consulting with 1 Finance can provide you with expert guidance, ensuring that any decision made is in the best interest of your overall financial health and long-term objectives. By engaging with qualified financial advisors at 1 Finance, you'll receive comprehensive advice that considers your entire financial situation, helping you make a well-informed decision that aligns with your holistic financial plan.

When can the policy be surrendered?

The option to surrender a life insurance policy is subject to specific eligibility criteria, which vary based on the policy's structure and terms. Understanding when you can surrender your policy is crucial in making an informed decision:

Under Single Premium Plans

These plans, where the entire premium is paid upfront in one lump sum, generally allow for the policy to be surrendered starting from the second policy year. It's a common policy stipulation that surrender is not permitted in the first year.

This restriction is in place to discourage premature termination of the policy and to allow a reasonable time for the policy's investment component, if applicable, to accumulate value. Few Single pay policies do allow the surrender from the first year itself.

Under Limited Premium and Regular Premium Plans

In these more traditional forms of life insurance policies, where premiums are paid periodically over a term, the eligibility to surrender the policy is often linked to the policy's duration.

For Example: Say, for policies with a term of 10 years or less, the policy can usually be surrendered after it has been in force for a minimum of two years, meaning surrender is possible from the third policy year onwards. For policies with longer terms exceeding 10 years, the minimum duration before surrender is typically extended to three years, allowing surrender from the fourth year onward.

These stipulations are designed to balance the policyholder's need for flexibility with the insurance provider's need to manage risk and ensure policy viability. The minimum period before a policy can be surrendered reflects a commitment period during which the policy is expected to remain active to uphold the life insurance contract's integrity and its intended purpose of providing long-term financial security.

How is the surrender value calculated?

When opting for policy surrender, policyholders receive the surrender value, which is calculated based on the higher of the Guaranteed Surrender Value (GSV) or the Special Surrender Value (SSV). Our calculator primarily utilizes the Special Surrender Value (SSV) with the formula:

SSV = [{(Number of premiums paid/Number of premiums payable) * Sum Assured} + Accrued bonus] * Surrender Value Factor (SVF).

The Surrender Value Factor (SVF) is determined by the insurance company, varying with the policy year of surrender. Generally, the later the policy is surrendered, the higher the GSV Factor becomes.

In essence, surrendering a life insurance policy is a significant financial decision, involving relinquishing coverage for an immediate payout. The surrender value is pivotal, representing the financial benefit obtained upon surrendering the policy. Use our calculator to assess this crucial aspect of your financial planning.

Documents required for surrendering the policy

When surrendering a life insurance policy, the policyholder needs to provide certain documents to the insurance company to complete the process. These documents are essential for verifying the policyholder's identity, ensuring the validity of the surrender request, and facilitating the transfer of the surrender value. The required documents for surrendering a policy include

The Surrender Discharge Form

This is the primary document required for surrendering a life insurance policy. The Surrender Discharge Form, or Form 5074, is an official document provided by the insurance company. It needs to be duly filled out and signed by the policyholder, indicating their intent to surrender the policy.

NEFT Mandate Form

To enable the transfer of the surrender value directly to the policyholder's bank account, an NEFT (National Electronic Funds Transfer) Mandate Form is required. This form authorises the insurance company to deposit the surrender value into the policyholder's bank account.

Identification Documents

A copy of the policyholder's PAN Card and Aadhaar Card (or other officially recognised identification documents) are required for identity verification purposes.

Original Policy Document

The policyholder must submit the original life insurance policy document. This is a critical requirement, as it serves as proof of the insurance contract that is being surrendered.

Cancelled Cheque

A cancelled cheque is required to provide the insurance company with the policyholder's bank account details. This ensures that the surrender value is credited to the correct account.

Postal Stamp of ₹1

A nominal postal stamp of ₹1 is required as part of the documentation process.

Reasons for Surrendering the Policy

While not always mandatory, some insurance companies may require a written statement or reason for surrendering the policy. This helps them understand the policyholder's motivation and can be useful for their records.

Submission to the Relevant Branch

It is important to submit these documents to the actual branch where the policy was issued, as mentioned in the original LIC policy document. This ensures that the surrender process is handled efficiently and by the correct office.

These documents collectively enable the insurance company to process the surrender request while ensuring compliance with regulatory requirements and safeguarding against fraudulent activities. The policyholder should ensure all documents are complete and accurately filled out to avoid any delays or complications in the surrender process.

How to use the Surrender Value Calculator?

Our Surrender Value Calculator is designed to provide you with a quick and easy way to estimate the surrender value of your endowment policy. Follow these simple steps to get started:

Step 1: Enter Your Policy Details

Policy Start Year

Enter the year when your policy commenced. This is the year you first took out the policy.

Policy Term

Enter the total duration of your policy in years. This is the length of time for which the policy is active.

Premium Payment Type

Select your premium payment type: Regular Pay, Single Pay or Limited Pay. If you opt for Limited Pay, please specify the premium payment term in years, which is usually shorter than the overall policy term.

Last Premium Payment

Choose the year in which you last paid your premium. This helps in calculating the amount you've already contributed towards the policy.

Step 2: Provide Your Cover Details

Sum Assured

Enter the total amount assured by your policy in lakhs. This is the amount your policy guarantees to pay upon maturity or in case of an eventuality.

Annual Premium

Input the total amount you pay each year for your insurance policy

Accrued Bonus

If applicable, input the bonus amount in Rupees that has been added to your policy till date.

Result

Once you've entered all the necessary details, the surrender value calculator will display the following results

Surrender Value

This is the estimated amount you would receive if you decide to surrender your policy now.

Sum Assured

Reconfirms the total cover amount that your policy assures.

Premium Paid Till Date

Shows the total amount of premiums you have paid up to the current date.

Premium Payable

Indicates the remaining premium amount that is yet to be paid.

Key factors to consider when using the Surrender Value Calculator

Review Policy Document

Before using the Surrender Value Calculator, review your latest policy statement for the most up-to-date information. This ensures the data you input reflects the current status of your policy.

Understand Policy Terms

Familiarise yourself with key terms related to your policy, such as 'Sum Assured', 'Premium Payment Term', and 'Accrued Bonus'. Understanding these terms will help you input the correct information in the Surrender Value Calculator.

Consider Policy Changes

If you have made any changes to your policy, such as increasing the sum assured or changing the premium payment frequency, make sure these are reflected in the information you put in the Surrender Value Calculator.

Check for Accrued Bonuses

If your policy includes bonuses or additional riders, ensure these are accounted for in the Surrender Value Calculator, as they can significantly affect the surrender value.

Regular Updates

Use the Surrender Value Calculator regularly, especially after receiving statements from your insurance provider, to keep track of how your surrender value may be changing over time.

IRDAI regulatory changes and the Surrender Value Calculator: What you need to know

Understanding the Change

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a significant shift in life insurance policies, focusing on increasing the surrender value. This change is pivotal for policyholders who choose to voluntarily terminate their life insurance policy before its maturity or the occurrence of the insured event.

Why This Change?

IRDAI observed that many policyholders were receiving minimal surrender values despite years of premium payments. Some policies were even structured to incur high surrender charges, disproportionately benefiting insurers at the expense of policyholders.

Proposed Benefits for Policyholders

The new proposal aims to significantly increase the surrender value while reducing surrender charges. This ensures that if you decide not to continue your policy until maturity, you receive a larger portion of your paid premiums back.

Example of the Change

Current System: Surrendering a policy with an annual premium of ₹1 lakh in the fourth year might yield a surrender value of ₹70,000, with the insurer keeping ₹2.3 lakh as charges.

Proposed System: Under the new proposal, the same scenario would result in a surrender value of ₹2,50,250, significantly reducing the insurer's retained charges to ₹49,750.

Frequently Asked Questions

Does the Surrender Value Calculator calculate the exact surrender value?
While the Surrender Value Calculator of 1 Finance can help you obtain an estimated surrender value of your policy, it's important to note that this is just an approximation. The exact surrender value can only be precisely determined by your insurance provider. They will consider various specific factors related to your policy, including the terms of your policy, the premiums paid, any applicable bonuses, and other policy-specific conditions.
Who can benefit from using the Surrender Value Calculator?
The Surrender Value Calculator is primarily designed for endowment policy holders who wish to estimate the surrender value of their policies. It is also a valuable tool for Qualified Financial Advisors (QFAs) and insurance professionals, aiding in providing accurate financial advice and calculations.
Why is it important to know the surrender value of your policy?
Knowing the surrender value is crucial because it represents the amount you will receive if you decide to terminate the policy before its maturity. This information is vital for financial planning, especially if your financial goals or circumstances have changed since you first purchased the policy. Calculate using the Surrender Value Calculator.
What factors influence the surrender value of an endowment policy?
The surrender value depends on several factors, including the length of time the policy has been in force, the total premiums paid, policy terms and conditions, and the performance of any investment component in the policy. Charges and fees associated with the policy also affect the surrender value.
Is surrendering an endowment policy always a good idea?
Not necessarily. Surrendering an endowment policy should be based on a thorough evaluation of your current financial needs, goals, and alternative investment options. It's advisable to consult with a financial advisor to understand the implications fully.
What are the tax implications on the surrender value?
When you surrender a life insurance policy, the surrender value you receive isn't fully taxed. Instead, you'll be taxed on the difference between the amount you receive and the policy basis, which is the total amount of premiums you have paid into the policy. Essentially, this taxable amount represents the investment gains that you're withdrawing from the policy.
How does term insurance compare to endowment policies?
Term insurance is purely a life insurance product that provides coverage for a specified period. It's generally cheaper than endowment policies and offers a higher cover for a lower premium. Unlike endowment policies, it does not have a savings or investment component.
What is an endowment policy?
An endowment policy is a type of life insurance policy that combines savings and protection. It pays a lump sum amount upon maturity or upon the death of the policyholder within the policy term. These policies are often used for long-term financial planning, like saving for retirement or a child's education.

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Disclaimer

The surrender value calculator is designed exclusively to enhance awareness and understanding of potential benefits in the context of surrendering life insurance policies. It is not intended to provide specific financial advice regarding your life insurance surrender decisions. Please consult with a qualified financial advisor for personalised guidance on policy surrender.

Surrender Value Calculator

Here's a breakdown of the rationale behind considering surrender

Surrender Value
For
The Surrender Value is calculated using the formula
[(
No. of Premiums PaidNo. of Premiums Payable
+ Sum Assured) +Accrued Bonus] + SVF
[(
0 0
+ ) +0] + 0%
SVF: Surrender Value Factor
Your Policy Snapshot
Sum Assured
Premium Paid Till Date
0
Future Premiums Payable (if continued)
0
Why consider surrender?
Coverage and premium disparity
Traditional endowment policies may have a mismatch between the coverage provided and the premiums paid. Surrendering allows you to reassess and align your coverage needs with a more suitable financial strategy.
Lower yield to maturity
The yield on maturity for such policies typically falls within the range of 4%-6%p.a. Surrendering empowers you to explore alternative avenues that might offer better returns on your investment.
Potential for better returns
By reinvesting the surrender value into high-quality instruments like mutual funds or NPS, you can potentially boost your returns. This strategic separation of insurance (pure protection with Term insurance) and investment (wealth creation with diversified instruments) ensures you are optimizing both aspects of your financial portfolio.
Conclusion
In essence, surrendering your policy can be a proactive step towards enhancing your financial well-being. By reassessing your insurance and investment needs separately, you can achieve a more tailored and efficient strategy. Consider this as an opportunity to maximize life coverage with Term insurance and pursue higher returns through strategic wealth creation.
Our goal is to empower you with the knowledge and tools to make informed decisions about your financial future.
Disclaimer
Surrender value is an estimate derived from the general surrender value factor applied to insurance policies in case of surrender.
The surrender value calculator is designed exclusively to enhance awareness and understanding of potential benefits in the context of surrendering life insurance policies. It is not intended to provide specific financial advice regarding your life insurance surrender decisions. Please consult with a qualified financial advisor for personalised guidance on policy surrender.