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How to Calculate the Surrender Value of Life Insurance Policy?

dateKnowledge Centre Team dateJuly 07, 2021 views217 Views
Buy Life Insurance Plan | Best Life Insurance Plan

Life insurance policies are usually purchased for the long-term as it is purchased to protect and safeguard the financial future of a person and his loved ones. However, there are times when a person thinks about giving up or surrendering a life insurance policy.

Surrendering a life insurance policy implies ending the association with your insurance provider. While many reasons why a policyholder can surrender his/her policy, such as the policy not providing adequate coverage, the policyholder cannot pay the premium sum. Surrendering a policy that is close to its maturity period causes you to lose a lot of advantages.

What is a Surrender Value?

A surrender value is usually the sum owed by the life insurance provider when you decide to surrender or give up on your life insurance policy. Whenever you surrender your life insurance policy, you receive a certain amount of premiums that you regularly paid back from the insurance provider. This receipt of payment is known as a surrender value.

How is Surrender Value Calculated?

All those policyholders looking for ways to calculate the surrender value of life insurance must note that calculating the surrender value in the present technologically advanced times is extremely easy.

You can now calculate the exact surrender value in minutes with the help of an effective cloud-based tool that is known as a surrender value calculator. You can instantly access this cloud-based surrender value calculator online to check the surrender value.



To obtain this information, all you require to do is present some basic details like the policy term, amount of the premium paid, premium payment mode, number of years the policy has completed, premium installment amount, etc., exact value.

Once you present all these details, the online surrender value calculator immediately determines your life insurance policy's surrender value.

When does a Life Insurance Policy Acquire a Surrender Value?

A life insurance policy acquires a surrender value in the following two scenarios:

a.When the policy duration is 10 years or more

In this situation, the surrender value of the life insurance policy is obtained if the premium amount is regularly paid at least for three consecutive years.

b. When the policy duration is less than 10 years

In this situation, the life insurance policy gets a surrender value if the policy's premium amount is regularly paid at least for two consecutive years.

Types of Surrender Value in a Life Insurance Policy

There are generally two kinds of surrender value in a life insurance policy: guaranteed surrender value and a special surrender value.

1. Guaranteed surrender value

Under this guaranteed surrender value of life insurance, the amount or a fixed sum guaranteed is to be owed by the insurance provider on surrendering or giving up on the life insurance policy before completion of the maturity period.

The guaranteed surrender value of a life insurance policy is decided based on the surrender value determinant stipulated in the policy papers. This surrender value determinant is usually the percentage of the cumulative premium amount paid. The surrender value of a life insurance policy, in this case, rises with the number of years of the policy.

The surrender value factor will grow close to 100 percent of the total premiums paid when the life insurance policy progresses nears maturity. Therefore, in this case, the guaranteed surrender value is computed as cumulative premiums paid that get multiplied by the surrender value factor.

2. Special surrender value

This special surrender value of a life insurance policy is customarily higher than the guaranteed surrender value. However, this entirely depends on the insurance provider. Specific surrender value relies on the amount ensured, premiums paid by the policyholder, policy course, and bonuses.

Usually, this special surrender value is determined with the formula - (Accrued bonuses + Paid-up value) multiplied by the surrender value factor. The paid-up value is calculated as the Basic sum assured multiplied by the number of premiums payable or the number of premiums paid.

Suppose you plan to surrender your existing life insurance policy due to inadequate coverage and look for a comprehensive plan to get a better financial cushion. In that case, you can buy a life insurance policy by Canara HSBC Oriental Bank of Commerce.

1. Invest 4G Plan

Invest 4G Plan is a customarily unit-linked savings insurance plan that can provide you with assured returns on all your investments. The plan offers higher premium flexibility, loyalty additions and wealth boosters for better returns and also offers partial withdrawal option that serves as a supplementary source of revenue in times of need.

2. Guaranteed Savings Plan

Guaranteed Savings Plan is an excellent and comprehensive life insurance cum savings plans that can secure your future along with that of your family members. The plan offer guaranteed returns from the investments along with tax exemptions on the premium paid under section 80C of the Indian Income Tax Act, 1961.

3. iSelect Star Term Plan

iSelect Star Term Plan is another life insurance policy by Canara HSBC Oriental Bank of Commerce that is popular due to multiple benefits. The plan offers limited premium payment option that means you can pay for limited years and get a life cover. You can also add your spouse to the same term insurance plan at discounted rates.

To state the obvious, giving up or surrendering your life insurance policy is not at all a rational decision, especially when it's close to maturity, as you never receive the entire sum that you paid as premiums. However, if you think your policy is not yielding decent returns, you can consider making such a decision or you can buy a new life insurance policy to suit your financial goals.

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Frequently Asked Questions (FAQs) Related to Life Insurance Policies

The premium is one of the most important factors to consider before buying a life insurance policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance plan. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Life insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age: It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chance of contracting diseases is low. Young people also opt for the best life insurance policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender: The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits: The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term: Policy terms are also taken into consideration by insurers while deciding the premium amount. Life insurance policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the best life insurance policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation: The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physician’s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence, there are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the life insurance policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance plan.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: A life insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the life insurance policy, the insurance companies generally pay 80% of the total premiums paid.

Buying the best life insurance plan online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. The best life insurance policies online insurance offer higher benefits. Customers should, however, buy online life insurance policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one life insurance policy to increase the cover or avoid claim rejection. In case of multiple life insurance policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy a life insurance policy, the insurance company asks for the nominee details. Only the person named as the nominee in the life insurance plan can cash out in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term, the beneficiary receives the death benefit. In case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment option is chosen, the policy works as a source of regular income.

It is a popular misconception that life insurance plans are only for accidental deaths. A term life insurance plan like iSelect Star Term Plan also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy a life insurance plan in your early 20s because it is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy the best life insurance plan at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why life insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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