What is paid-up value? | Value Research If you do not want to continue the policy, it is always better to surrender the policy
Ask Value Research

What is paid-up value?

If you do not want to continue the policy, it is always better to surrender the policy

I have two questions.

  1. 1)What happens if an insurance policy is converted into paid-up after maturity? The customer has paid two premiums and the policy term is 20 years. Can he get at least the premium paid?
  2. My friend bought an ULIP form SBI Life. The annual premium is ₹1 lakh and the policy term is 20 years. What happens if she stops paying the premium. Should she surrender the plan?
- Ajay Kolambe

It is very difficult to comment anything specific because you haven't offered the name of the policies.

Paid-up value is the reduced sum assured paid by the insurance company if a policyholder fails to pay premiums after a certain period. Typically, endowment plans acquire paid-up value if the premiums are paid for three years. The paid-up value increases if the policyholder continues to pay the premiums. If for some reason the policyholder fails to pay the premium after the first three years, the paid-up value will remain the same. If the premiums are not paid, no further bonus would be added to the policy. If the policyholder dies, the insurer will pay only the paid-up value of the policy as death claim. If the policyholder continues to hold the policy, he will get the paid-up value at the end of the term. The policyholder also have the option of surrendering the policy before that. If you do not want to continue the policy, it is always better to surrender the policy.

Here is an example to illustrate the concept clearly. Suppose you bought an endowment plan with ₹1 lakh sum assured (or insurance cover) and a policy term of 20 years. You pay annual premiums for the 10 years and stops paying premiums after that.

In this case, the paid-up value would be: number of premiums paid (10)/number of premiums payable (20) X sum assured (1,00,000) = ₹50,000. If the policy has already accrued bonuses of ₹25,000, the total paid-up value would be ₹75,000 (₹50,000+₹25,000).

This amount will be paid on maturity or death of the policyholder, whichever earlier.

ULIP policy brochure clearly mentions which all charges will be applicable on paid-up value of the policy, whereas traditional policies are silent on the same. You must consult your insurer for more details.


Other Categories