Surrender facility is available, it does not mean that you can surrender your policy anytime. For this a minimum period is fixed. This minimum period is calculated from the date of purchase of the policy. How long the period will be depends on the policy term and premium term
1) What will happen in the plan with single premium- If there is a policy with single premium plan, then it can be surrendered only after the second year of its inception. Generally surrender is not allowed in the first year of inception of the policy.
2) Limited premium and regular premium plan- If you have a policy with limited premium and regular premium plan, then the term of your policy can be seen. If the term of the policy is 10 years or below, then the surrender duration remains of two years, but if the term is more than 10 years, then the minimum duration of surrender will be 3 years
What do you get when you surrender?
The surrender value is calculated with two factors. First Guaranteed Surrender Value (GSV) and second Special Surrender Value, let’s know about them
1) Guaranteed Surrender Value (GSV)-
Under this, the policyholder will surrender the policy only after 3 years. This means that he should have paid premiums for at least three years. On surrender after three years, he will get the surrender value of 30% of the total premiums paid. However, it excludes the first year’s premium and premium paid on Accidental Benefit riders.
2) Special Surrender Value-
It is usually higher than GSV. If you have paid premiums for a term of more than 3 years but less than 4 years, you get 80% of the Maturity Sum Assured. Whereas, if you have paid premium for more than 4 years but less than 5 years, then you get 90% maturity sum assured. In addition, if you have paid premiums for more than five years, you get 100% of the Maturity Sum Assured.
How is Maturity Sum Assured calculated?
Maturity Sum Assured is calculated based on the amount of premiums you have paid. Its formula will be:
Original Sum Assured* (number of times premium paid/premium to be paid) + total bonus received * surrender value factor
Should the policy be surrendered?
It is generally not advisable to surrender the policy, as it puts you at risk on multiple fronts. First, apart from losing out on the benefits of the scheme, the surrender value you get is much less than the premium paid on your policy, so you are at a loss here too
