About IndianMoney.com :
IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products
What happens when you surrender your endowment life insurance policy?
You purchased that endowment life insurance plan in a hurry to save tax. You find it a pain in the neck and want to get rid of it quickly as it does not match your needs and expectations.
This is when your insurance agent tells you to surrender your endowment life plan.
There are 2 types of values you get when you surrender your endowment life policy:
- Guaranteed surrender value.
- Special surrender value also called cash surrender value.
The surrender of your endowment life plan depends on the premium paying period of the plan. If your plan has a premium paying period of over 10 years you can surrender your endowment life plan after 3 years.
You get 30% of the premiums you have paid in the first year, second year and the third year.
If your endowment life plan has a premium paying period of less than 10 years you can surrender it after 2 years. You get back 30% of the premiums you have paid in the first year and the second year of the policy.
The endowment life plan is void after you opt for the guaranteed surrender value.
To know what is special surrender value you need to know what is paid up value of an endowment life plan.
You have stopped paying your premiums but want to enjoy the benefits of your endowment life plan. You can convert it to a paid up policy.
You can convert your endowment life plan to a paid up policy after holding it for 3 years.
The endowment life plan continues to be in force, but with a lower sum assured. You don’t get any bonuses after you stop paying the premium.
So how to calculate the paid up value of your endowment life plan?
Paid up value =(No of premiums you have paid/ No of premium payable)*
Sum assured
You have availed an endowment life policy with an annual premium of INR 30000.The sum assured is INR 4 Lakhs after 10 years (term of the policy).There is a bonus paid of INR 50,000 after 4 years of holding the policy. If you stop paying your premiums after 4 years the paid up value of your policy is:
Paid up value = (4 /10) * INR 4,00,000 = INR 1,60,000.
You will get INR 1,60,000 at maturity (after 10 years) or your nominee gets this money after you die.
So what is the special surrender value of your endowment life plan?
The endowment life plan pays you a bonus. You have the guaranteed bonus, revisionary bonus and the maturity bonus.
Your total paid up value = Paid up value + bonus.
Special surrender value = Total paid up value * surrender value factor.
Surrender value factor varies from insurer to insurer and is generally 0 for the first 3 years of your endowment life plan. It could be 0.3 after 4 years of the policy.
You can calculate special surrender value as:
Special surrender value = Total paid up value * surrender value factor.
Total paid up value = paid up value + bonus
Total paid up value = INR 1,60,000 + INR 50,000 = INR 2,10,000.
Special surrender value = INR 2,10,000 * 0.3 = INR 63000.
If you know how to calculate the surrender value of your endowment life plan you can easily get the best out of it.
For More Details Give Missed Call :
No comments:
Post a Comment