The paid-up value is calculated as original sum assured multiplied by the quotient of the number of paid premiums and number of payable premiums. Suppose the policyholder stops paying premium after a specific period, the policy would continue, but at a lower sum assured, which is termed as paid-up value. To understand this, one needs to first know what paid-up value is. “For instance, suppose you paid Rs30,000 (Rs10,000 per year x 3) in the initial three years for a sum assured of Rs3 lakh, the minimum surrender value you can get is 30% of Rs20,000, which is ₹6,000 (excludes the first year premium),' said Goyal.
Moreover, it excludes the premium paid for the first year, additional costs paid towards riders and bonuses (you might have received). This value makes up to only 30% of the premiums paid towards the plan. The guaranteed surrender value is payable to the policyholder only after the completion of three years. There are two types of surrender value-guaranteed surrender value and special surrender value Terminating the insurance plan would result in ceasing the benefits of the plan, including coverage.'
Rakesh Goyal, director, Probus Insurance, said, “A recent directive by the Insurance Regulatory and Development Authority of India (Irdai) states that the policyholder can’t levy any surrender charges if the policy is exited after five years.
