Endowment insurance plans, a mixture of an investment and a life cover, are long-term contracts, usually for 10, 20 or even more years. However, it is possible to terminate (surrender) them midway and seek whatever has been accumulated till then. But since the contract is terminated midway, only a certain portion of the total accumulation is returned, known as the 'surrender value'. The remaining is considered the penalty for terminating the policy midway.
Most insurance policies allow surrendering it only after paying the premium continuously for three years. However, this may differ for different policies. Likewise, the surrender value differs for each policy depending on its specific terms and conditions. But it is not difficult to find them.
Grab the policy document that was issued to you when purchasing the policy. Sift through the pages and look for the clause about 'Surrender' in the detailed 'Terms and Conditions' section. It is usually a separate point and should not be difficult to find. It will be a lot simpler if you have a pdf of the terms and conditions. Use the find function and search for 'Surrender'.
The clause would have details on both the things - when can the policy be surrendered (after how many years) and what will be the surrender value. It would have the complete mathematical formulae to calculate the surrender value.
In most policies, it is the higher of the 'Guaranteed Surrender Value' and 'Special Surrender Value.' Guaranteed surrender value is usually 30 per cent of the total premiums paid, excluding the premium paid for the first year and the premium paid for any rider. Special surrender value mainly depends on two factors. One is the paid-up value which is the reduced maturity amount or the sum assured in proportion to the total number of years for which the policy has run compared to the original tenure for which the policy was purchased. The second is the 'Surrender Value Factor', an index issued by the insurance company. This again is based on the original tenure of the policy and in which year it surrendered.
Endowment policies are neither good as an investment nor as insurance. It is generally advised to quit them if you are far away from their maturity and invest the proceeds in better-returning investment products. And buy a pure term plan separately for your insurance needs. However, if the maturity is just a few years away, make the calculations. It may be worthwhile to stick for another couple of years.
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