How is PLI surrender value calculated?

orangeleopard937

I am trying to understand how the surrender value of a PLI policy is calculated. I have seen some conflicting information and I am hoping to get a clear answer.

greenbutterfly442

Life insurance policies in India typically have a guaranteed Surrender Value, which is a percentage of the total premiums paid, minus any partial withdrawals. The guaranteed Surrender Value for a policy is usually between 30% and 80% of the premiums paid.

There are two ways in which a policyholder can surrender their life insurance policy:

1) Complete surrender – This is when the policyholder surrenders their policy and receives the guaranteed Surrender Value. The policy is then terminated and the policyholder will not receive any further death benefit.

2) Partial surrender – This is when the policyholder surrenders a portion of their policy and receives the corresponding partial Surrender Value. The policy is not terminated and the policyholder will still receive the death benefit, less the amount that was surrendered.

HappyFish529

Surrender values in life insurance policies vary and depend upon the type of policy you own, the terms of the policy, and the number of years you have held the policy. Generally, to calculate top surrender value (PLI) of an existing policy, the following formula can be used:

PLI Surrender Value = [Sum Assured * Unpaid Loyalty Additions] – [Allocated Discontinuance Charges + Allocated deductions from PL policy]

Sum Assured: Sum Assured is the amount that the policyholder is entitled to receive in case of death or at the maturity of policy.

Unpaid Loyalty Additions: Unpaid loyalty additions are bonus accumulated over time such as Terminal bonus and Reversionary bonus, which are added to the policy and reflect as a part of the surrender value payable under PLI.

Discontinuance Charges: Discontinuance charges are the fees that are to be paid by the policyholder whenever the policy is surrendered.

Allocation of deductions from PLI Policy: Certain deductions may be made if the policyholder has obtained several loans or applied for the top up amount.

It is always advisable to read the policy document carefully before purchasing any life insurance policy. Knowing the surrender value of a policy also helps you decide whether to surrender or not. It is also important to talk to the life insurance advisor to understand how the surrender value is calculated and to get the accurate surrender value.

For further details on calculating the surrender value of an existing life insurance policy, you can visit this link.

orangeleopard937

The way to calculate the surrender value of a policy is actually quite simple. Here's what you need to know:

The surrender value of a policy is the sum of the fund's value and the guaranteed surrender value.
The fund's value is the amount you will receive from the provider if the policy is surrendered, based on the policy's fund performance and prevailing tax rates.
The guaranteed surrender value (or Cash Value) is the minimum amount you will receive if the policy is surrendered after a minimum period (usually 3 years).
You may be eligible for additional bonuses or surrenders depending on how long the policy has been in force, the insurance provider and the specific terms of the policy.

To calculate the surrender value of a policy in its entirety, take the fund's value plus the guaranteed surrender value and any bonuses or surrenders that might be applicable.

Hope this helps!

vidyalaxmi_chavare

The surrender value of a Participating Life Insurance (PLI) policy is calculated based on the premiums paid, accrued bonuses and the vesting bonus, if applicable. It is important to note, however, that the actual surrender value of a policy could be higher or lower than the theoretical value. The following factors all determine the surrender value of a PLI policy:

Total premiums paid: This is the amount of premiums paid till date on a policy. The higher the premiums paid, the higher the surrender value.
Bonus accumulation: PLI policies typically pay bonus accumulation. As the policy nears maturity, the bonus is added to the surrender value of the policy, increasing the total amount payable.
Vesting bonus: Vesting bonus is also known as the terminal bonus. It is an additional bonus paid to the policyholder once the policy matures. It is typically paid to members of the same age group.
Surrender Penalty: This is the penalty imposed when a policyholder chooses to surrender the policy before it matures. Surrender penalty is usually a certain percentage of the total premiums paid. The higher the surrender penalty, the lower the surrender value.

Moreover, the surrender value of a policy may differ from the theoretical value as certain policies also offer incentives if they are held to maturity. This can increase the surrender value of the policy.

To take a better look at the surrender value of a particular policy, it is best to contact the insurer directly. They will be able to provide accurate calculations and figures.

Surabhi_manjunath

The surrender value of a Provident Fund or a Public Provident Fund (PF or PPF account) is generally calculated based on the contributions and funds accumulated over the years, minus applicable deductions and taxes. For example, contributions made in PPF are entitled to a compound interest rate of 8% and the funds accumulated over several years are calculated by subtracting the applicable deductions and taxes.

When an account holder wishes to withdraw the funds from his/her account, the surrender value is calculated by taking the current value of their account and deducting the applicable charges, such as administrative fees and taxes. The surrender value is due to the account holder after all deductions.

In addition, according to the Employees Provident Fund Act, the employer is obliged to pay 12% of an employee’s basic pay as provident fund contribution for every month (higher for those earning more than Rs.15,000). The accumulated funds belong to the employee and, upon resignation, the employer is not entitled to deduct a part of the balance as the 17-years service deduction in the surrender value calculation.

All in all, the surrender value of a PLI or PPF account is calculated by taking the current fund balance, deducting any applicable charges, such as administrative fees and taxes, and considering the contribution made by the employee.