For annuities, surrender charges are generally calculated based on the amount withdrawn from the annuity. Typical arrangements involve an initial charge of 7%, but for every year thereafter, the percentage charged is reduced by 1 percentage point.
What is a a surrender charge?
A surrender charge is also known as a surrender fee. The surrender charge amount depends on when the policyholder terminates their insurance contract. The insurer may impose a lower sum if the policy was kept for a longer term.
How are surrender charges calculated for annuities?
For annuities, surrender charges are generally calculated based on the amount withdrawn from the annuity. Typical arrangements involve an initial charge of 7%, but for every year thereafter, the percentage charged is reduced by 1 percentage point.
How do you calculate the surrender value of a policy?
On discontinuing a policy, you get special surrender value, which is calculated as the sum of paid-up value and total bonus multiplied by surrender value factor. “Suppose you paid Rs15,000 on an annual basis for a sum assured of Rs3 lakh for a policy tenure of 20 years.