Difference Between Surrender Value And Paid-up Value
He thought of this insurance as an Opportunity For Savings And Insurance. Still Want To Look That Way But Can’t afford the premium anymore. what to do
At the age of 55, Abhishek bought life insurance for 12 years for 8 lakh rupees. Premium on Rs.19 thousand per quarter after retirement. After Retirement, He Calculated And Saw That he has to pay a premium of 8 lakh 66 thousand rupees. Since it is an Endowment, Bonus And Profit Share Will be added to it. So, if the savings decrease after retirement, he made this Insurance With The Idea Of Reimbursing the savings. Whether that was right as a savings strategy is a different question. What happened happened. What is The Road Ahead Of Him Now?
However, he had an argument. Everyone’s income decreases after retirement. Very few people get the chance to Continue Working. Still Thought To Continue. But this premium started to feel heavy in Abhishek Babu’s pocket. Even though it was difficult, he continued. Six years but can’t pull anymore. Again thinking that so Much Money Has Been Given As premium for so long. He thought of this Insurance As An Opportunity For Savings and insurance. Still want to look that way but can’t afford the Premium Anymore. What To Do
Also Read – A Step-by-step Guide To Building An Insurance Portfolio
Abhishek has two options open to him: a) Surrender the insurance, b) Treat The Insurance Premium As Paid Up.
Let’s See The Difference Between The Two.
a) Aspects of Insurance Surrender
You Can No Longer Afford Insurance. Or he calculated and saw that he bought the insurance by keeping the savings and the insurance together. But now you see That If You Look At These two separately, his income will be more. Abhishek Babu can therefore Surrender The Insurance. He Can Get back a part of the premium he has paid. But Not All. The Portion Of This refund you get depends on different policies and insurance companies. But if it is less than 3 years, chances of getting Some Money Back Are Less. Usually the figure is like this:
Now How He Thinks About This Number will depend on him. There is another way open to him. He wants to Deposit Money, Also Wants Insurance benefits, but does not want to take new insurance. Not Even The Term. Want To Deposit Money again. It is better for Him To Pay Up The Insurance.
B) Amount Of Paid-up
The First Three To Five Years Are A strange time in insurance. If you stop paying Premium Within This Period After initiation, nothing will be refunded. So let’s assume that Abhishek Babu has crossed the Five-year Mark. Now He Paid Up. In This case, it is enough to stop paying the Premium. In Case Of Surrender, However, the insurance company has to be informed. Then the company Calculates How Much Money You Can get back as per the terms of the policy and deposits that money into your account. Since the sum assured is Involved In Paid-up Policies, It Is important to calculate how much your Sum-assured Will Be. That number is Calculated As Follows:
Modified Sum-Assured = Initial Sum-Assured X (years premium paid / years due)
Let Us Take The Example of Abhishek Babu. He bought a Policy Of Rs 8 Lakh For 12 Years. But want to stop Premium With 6 Years Premium. His Sum-Assured will stand-
800000X(6/12) = Rs.4 lakhs.
Keep in mind this number is just for Your Estimation. On Top Of That After 12 Years You Can Also Get Bonus And Profit Share. But It Will Depend On The terms of your policy. It should be kept in mind that Abhishek Babu has invested 4 lakh 56 thousand rupees on this Insurance If He Takes The Quarterly premium of 19 thousand rupees! So No Matter How Much Bonus and profit share he gets, it will not come Close To What He Would Have Got if he had invested the money in Other Ways After Adjusting For Inflation.
