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Surrender value: How much you get if you quit your policy early
Do you want to cancel your insurance policy prematurely? You should be aware of surrender value before you make that decision. This is the amount you receive if you terminate your policy prior to its maturity. All policies may not have this facility and even if they do have this provision, the surrender value sum may differ.
What is surrender value?
Surrender value is the money a policyholder gets from an insurance company when they choose to cancel their policy prior to the policy's maturity period. It's like a refund, but not for the entire amount you contributed. The insurance company retains some money to compensate for their expenses.
Suppose you paid ₹100,000 in premium payments over the course of five years and choose to cancel. You might get only ₹60,000 as the surrender value.
Types of surrender value options
There are two main types:
| Type | Description |
|---|---|
| Guaranteed Surrender Value (GSV) | The minimum amount you will get back if you surrender your policy. |
| Special Surrender Value (SSV) | Usually higher than GSV, based on the policy's current value and company rules. |
Factors affecting surrender value
Various factors influence the amount of money you receive back:
- Policy term - How long you've had the policy
- Premium amount - How much you've paid in total
- Policy type - Some policies accumulate value more quickly than others
- Duration - The longer you've had the policy, the higher the surrender value
- Market conditions - Occasionally influences the calculation.
Conclusion
Surrender value provides you with a certain degree of financial freedom in your insurance policy. But it's best to hold on to your policy until maturity for the best gains. Surrendering it early might lead to lower payouts. Hence think twice and hard before you make this major decision.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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