Definition
Surrender Value
Surrender value is the amount a life insurer pays you if you terminate a savings-linked policy before maturity.
Surrender value is what you receive if you exit a participating or savings-linked life policy (endowment, money-back, ULIP, whole life) before it matures. Pure term plans usually have no surrender value because they carry no savings component.
Surrendering early often means a significant loss, as initial premiums go toward charges and a guaranteed surrender value accrues only after a minimum number of premiums are paid; a higher special surrender value may apply later. Regulators have pushed for fairer, higher surrender values, especially in early years.
Before surrendering, consider alternatives like making the policy paid-up (reduced cover, no more premiums) which may preserve more value than a full surrender.
Related terms
- Maturity Benefit vs Death BenefitDeath benefit is the payout if the insured dies during the policy term; maturity benefit is the amount received if they survive the term.
- Endowment PlanAn endowment plan is a life insurance policy that combines a death benefit with a lump-sum savings payout at maturity if the policyholder survives the term.
- ULIPA Unit Linked Insurance Plan is a single product that bundles life insurance cover with a market-linked investment fund.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.