Notes on the Nature and Meaning of Surrender Value
It has been revealed in previous chapter that the premiums received by the insure; are accumulated with a certain rate of interest, which form the shape of reserve. When the insured wishes to surrender his policy or fails to pay his premium, reserve is no longer accumulated and the insured, generally, is given a surrender value.
The surrender value will not be equal to the accumulated reserve because certain expenses or losses are involved in payment of surrender values. Now, the definition of surrender value can be as that amount of premiums paid which is returned to the policy-holder at the time of surrendering the policy.
Normally no surrender value is paid if the policy lapses within two or three years of its issue because huge expenditures are involved during the inception of the policy. It has been realised that the insurer may return the excess of receipts over expenditure only after two years of the policy.
ADVERTISEMENTS:
In India, the policy can be surrendered for cash after the premiums have been paid for at least two years or to the extent of one-tenth of the total number, stipulated for in the policy, provided such one-tenth exceeds one full year’s premium.