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What Is Surrender Value? How To Calculate Surrender Value?

Published On Aug 13, 2021 12:00 PM By InsuranceDekho

Surrender value if the sum of money that is payable by the insurance company when you terminate your insurance policy before its maturity. Generally, most of the traditional insurance plans can be surrendered for cash after completion of three policy years. That means policy acquires surrender value on completion of the first three years.

When you surrender the policy after completion of three years, higher of the guaranteed surrender value or special surrender value will be paid in case of traditional policies.

Types of the surrender value

There are two types of surrender value called Guaranteed surrender value and a Special surrender value

1. Guaranteed Surrender Value

The amount of money guaranteed to be payable by the insurance company on surrendering the insurance policy before completion of maturity. Guaranteed surrender value is determined based on the surrender value factor specified in the policy document. The surrender value factor is the percentage of total premiums paid. Surrender value factor increases with the number of years of the policy. Surrender value factor will get close to 100% of premiums paid when the policy nears maturity.Hence, the guaranteed surrender value is calculated as total premiums paid multiplied by the surrender value factor.

2. Special Surrender Value

Special surrender value is usually higher than the guaranteed surrender value. However, it depends on the insurance company. Special surrender value depends on the sum assured, premiums paid, policy term and bonuses. Generally, special surrender value is calculated,Special surrender value = (Paid-up value + accrued bonuses) X surrender value factor
Where paid-up value = Basic sum assured X (Number of premiums paid/Number of premiums payable)

3. Surrender Value Calculator

The surrender value of life insurance policy can be calculated easily using an effective online tool called surrender value calculator. You can access the surrender value calculator online on the website of an insurance company. You need to provide some of the basic information to calculate the surrender value instantly. All you need to provide is your contact details, plan name, policy term, number of premiums paid, premium payment mode, premium instalment amount and number of years the policy has completed. Once you submit the details, the surrender value calculator instantly calculates your policy’s surrender value.


As soon as you surrender, your risk cover benefit will cease. Calculation of surrender value considers premium paid and in certain case bonuses but only up to the extent of surrender value factor. Hence, you will partially lose out on whatever you have already invested. You will lose on the yearly tax benefits that you receive on premium payment. As you lose out on many benefits, consider surrendering the insurance policy only if the decision makes financial sense.

You may also like to read - Reasons Why You Need Term Insurance Plan As A Self Employed Person

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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