Life insurance companies provide for giving surrender value
of the policies if a certain number of premiums have been paid by the customer.
If payment of subsequent premiums is stopped the insurer pays the customer the
paid-up value of the policy on the date of maturity. We have seen this in the
Post on non-forfeiture regulations. The present value of the paid up value is
called surrender value. It is a discounted value. The surrender value paid by
insurance companies is known as special surrender value. Generally this is a
very small percent of what is paid by the customer. There is a statutory
requirement [Section 113 of The Insurance Act, 1938] that the insurer shall pay the higher of
special surrender value or guaranteed surrender value. With this background
information let us read the privilege of guaranteed surrender value in
‘Conditions and privileges’. ‘This policy can be surrendered for cash if
premiums have been paid for at least three years. The minimum surrender value
allowable under this policy is equal to 30% of the total amount of the within
mentioned premiums paid excluding the premiums for the first year and all extra
premiums and or additional premiums for accident benefit that may have been
paid provided that if a portion of the sum assured had become payable or has
been paid on the life assured surviving to the stipulated date prior to such
survival or surrender will be excluded for calculating the surrender value. The
cash value of any existing vested bonus additions will also be allowed.’
Key words:
Conditions and privileges of policy
Guaranteed surrender value
Special surrender value
Section 113, The Insurance Act, 1938.
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