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Home / Policy Services / Surrender Value

Surrender Value

Introduction :

Whenever a policyholder desires to terminate the policy contract during its currency i.e. before the expiry of the term, the Corporation offers to pay the cash Value available in cancellation of the policy contract.  This is known as the “Surrender Value.”

The life insurance is essentially a co-operative enterprise.  The premiums paid by the policyholders are pooled together and the balance of amount after paying the claims of those policyholders who have unfortunately died and meeting the expenses of management etc. is formed into, or added to, a fund which is accumulated at interest.  As such, when any one of the policyholders desires to opt out of the co-operative enterprise, he is not entitled for refund of the entire amount paid by him.  He is entitled only to a share of the share left over.  This is the reason why the amount paid as cash value on Surrender of a policy contract is lower than the premiums paid.

Naturally, some of the policyholders who desire to surrender their policies might complain as to the amount offered on receiving the quotation letter from the office.  It is the duty of the agent to explain to these policyholders as to how life insurance differs from Banking business in as much as the life insurance provide life cover and also why the amount offered is lower than the amount paid by him by way of premiums.  In early stages after issue of a policy, the surrender value will be much lower as compared to the premiums paid due to the heavy incidence of initial expenses.  So it is not in the interest of the policyholders to surrender at that stage.  It is not only a loss of money paid by him but it also deprives him of  the insurance cover enjoyed by him at a lower rate of premium due to lower age at the time of entry.  So whenever a policyholder desires to surrender a policy, it is the duty of the agent to explain to him the disadvantages as stated above and dissuade him from surrendering his policy.  Anyhow, if he insists, it should be done as a last resort.

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