Licentiate Exam - IC 02 Practice of Life Insurance Exam - Important Points
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Surrender value or cash value is made available generally when the policy has remained in force for at least three years
As per Section 113 of Insurance Act 1938, all policies which have been in force for at least three years, are entitled to receive a guaranteed surrender value, which must be shown on the policy document.
In the event of a policy lapsing because of non-payment of premium, the following options are available: 1) payment of surrender value or cash value, 2)reduced paid-up value for the remaining term of the policy, 3)Automatic advance of future premiums until the surrender value is exhausted, 4)Extended term insurance cover available on the basis of the net surrender value
Paid up value = (Number of premiums paid x Sum Assured) / Total No. of Premiums Payable
When a policy is paid up, it is free from future payment of premiums
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