What is Surrender Value? Types, Formula to Calculate Surrender Value using Calculator?

Surrender value is the money paid by an insurance company to a policyholder when the person terminates their policy before it matures. For policyholders who terminate policies before maturity, knowing all about surrender value is important.

What is Surrender Value?
However, this is applicable mainly in the case of conventional policies. Please remember that when you surrender a life insurance policy you would get a portion of both the amounts that the insurer has allocated towards earnings and savings for you. The money that is deducted from you in these cases is referred to as a surrender charge, and the amount, in this case, tends to vary from one policy to another. This is however applicable only for the policies that are surrendered in the middle of the coverage period. If you surrender the policy after five years the insurer would not be able to deduct any surrender charge from you.
This is as per a recent directive that has been issued by the IRDAI (Insurance Regulatory Development Authority of India). In that case, you would get the entire fund value of your investment.
Also Read: Understanding The Values Of Term Life Insurance
Different Types of Surrender Value
What is surrender value? You already know that. Now it is time to know the different types of the same. There are two major options in this case – guaranteed surrender value and special surrender value. The term guaranteed surrender value means the money that your life insurer would pay you for sure when you surrender the policy before it reaches the maturity period. This particular value is usually determined based on the surrender value factor that is mentioned in the policy document.
1. Guaranteed surrender value
The value is calculated by using a tool named surrender value calculator. The surrender value factor is basically a percentage of the total premiums you have paid on the policy to date. This value factor increases with the number of years for which you continue to pay the premiums of the policy. Thus, the factor would get close to 100% when the policy reaches maturity or is on the verge of doing so. This is the reason why the guaranteed surrender value is calculated by multiplying the total premiums you have paid for the policy with the surrender value factor.
2. Special surrender value
An important part of understanding the surrender value meaning is to know about the different types of the same and this brings us to the next type of surrender value – special surrender value. This particular value is normally more than the guaranteed surrender value. The special value depends on the sum assured that has been guaranteed under the policy as well as other factors such as the premiums you have paid for the policy, bonuses, and the term period of the policy. Following is the formula for calculating this particular value:
Also Read: Best Term Insurance Plan in India 2022
Surrender Value Formula
Bonuses accrued on the policy + paid-up value X surrender value factor
Basic sum assured X (number of premiums/number of premiums that you are yet to pay on the policy)
In this case, the following formula is used to calculate the paid-up value:
Also Read: How To Surrender LIC Policy Online
Surrender Value Calculator
As we have indicated already, this is an online tool that is used to calculate the surrender value of a policy. It may be assumed that you may have understood by now that this is an effective tool. You can easily access the same at the websites of all companies that are selling life insurance policies. All you need to do is provide some basic information and you would be able to calculate said value in an instant.
If you want to use this tool to know what is surrender value on your policy you would have to furnish details such as the following:
- plan name
- policy term
- the number of premiums you have paid on the policy
- the mode you have followed for paying the premiums
- the installment amount of each premium
- the number of years for which you have continued the policy
After you have submitted all these details the tool would calculate the surrender value of your life insurance plan in an instant.

Author Bio
Paybima Team
Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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