Surrender value is the amount that a policyholder will get from the insurance provider if he/she decides to exit the policy before maturity.
A mid-term surrender of a policy will result in the policyholder getting only a sum of what has been allocated towards savings and the earnings, thereon. A surrender change will be further deducted, which varies from one policy to another.
Do note that according to a directive from sector regulator Insurance and Regulatory Development Authority of India (IRDAI), life insurance companies cannot levy surrender charges if the policyholder chooses to terminate the cover after holding it for five years.
Surrender value is applied to a regular premium policy only after the policyholder has paid his/her premiums continuously for three years. However, its imperative that you keep a track of this policy until it matures. Once you decide to exit the insurance policy, all the benefits associated with it, including the protection cover, will cease to exist.
Surrender value in unit-linked insurance policies (ULIPs) is usually expressed as the fund value minus the surrender charge.