The News Craving
June 27
Insurance policy is an investment which people normally opt for a risk cover. This is also used by people for tax rebate in their income. The Life Insurance Policy provides both the life cover and the tax rebate. At times people may not have been able to pay the premiums and would have to go for the surrender of the policy.
Things To Consider Before Policy Surrender
There are number of things that you need to consider before the surrender of the policy. Some policies have provisions where even the premium paid is not returned if the policy has not acquired the surrender value. So the the investment in insurance policy has to be carried out after taking into account your capacity to pay the premiums and whether you can pay the policy till the time of maturity.
LIC versus Other policies
Insurance company LIC has offered policies that are mostly long term policies. However several private insurance policies are offered for short term basis. The LIC policies mostly require the payment of premiums from 10 to 15 years. The maturity value of the policy is calculated based on the bonuses that may have an earned. However, if the the policy is not continued by policy holder till the time of maturity and if it has reached the surrender value there is a way to calculate the same.
Surrender Value Calculation
In the most policies the surrender values are specified within the policy who is mostly 30 to 90% of the premiums that have been paid from the first 3 years to a year before the maturity. LIC policies on surrender also provide bonus whose value is however significantly lesser than what could have been earned at the time of maturity. In HDFC insurance, the policy like the Life Sanchay the benefits for the reduced paid-up policy are calculated on using the formullae F1 * Annual Income Benefit Amount * Premiums Paid /Premiums payable under the Policy. F1 is the discounting factor calculated using prevailing interest rates described in Part D Clause 4 of the policy.
The HDC life Sanchay policy has also an option to review the maturity benefits in a lump sum as well as monthly payouts. However the HDFC life has not entertained surrenders based on the monthly pay out option as specified in the policy.
