Sometimes one may realize that a Insurance A policy purchased at any point of time for the purpose of tax saving is not really adding to one’s insurance cover or investment returns substantially. In such a scenario, one may wish to terminate the policy before its maturity period instead of holding the policy. it is known as surrender policy, in which surrender value The policy is paid out to the policy holder.

surrender value

A policy acquires a surrender value when the policy is in force and becomes mandatory lock in period is completed. Typically, a policy with successful three years of premiums paid acquires a surrender value. One can check the surrender value of the policy on the online portal of the insurance company. It is a percentage of the fund value of the policy. A term policy is a pure insurance policy and has no investment component, and hence has no surrender value.

charge

Surrender charges are deducted at the time of surrender of the policy and the balance amount is paid to the policyholder.

Forms and Documents

A policy surrender request has to be filled and submitted to the insurance company. Original policy document, a canceled check and self-attested copy of KYC documents have to be attached with the application. The reason for surrender may also have to be mentioned in the form.

noteworthy

• Once the application for surrender is submitted, it will usually be processed within 7-10 working days.
• When a policy is surrendered, the policy holder loses all the benefits of the plan, so it is important to weigh all the pros and cons of surrendering the policy.

(Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)