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CHANAKYA NATIONAL LAWUNIVERSITY

SUBJECT- INSURANCE LAW

PROJECT WORK ON

“SURRENDER AND PAIDUPVALUE OF INSURANCE POLICY”

SUBMITTED TO- Mr. SHAIWAL SATYARTHI

SUBMITTED BY-PRAGYA SINGH

ROLL NO:- 5 !

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! TH SEMESTER

ACKNOWLEDGEMENT

T'& (r)*)+% $ ,r &/* '$0 +& 1 *'& 2 0* 0)%+)3/$+* $/$4&2)/ /'$ &+%&0 I

'$6& &6&r 1$/&4. A+7 $**&2,* $* $+7 &6& /$+8* 9& 0$*)01$/* r) 7 / 2, &*&4

()*' * *'& 0 ,, r* $+4 % )4$+/& 1 &$r+&4 ,& , &. I $2 6&r('& 2&4 )+

$ ' 29 &+&00 $+4 %r$*&1 +&00 * $/;+ ( &4%& r 4&,*' * $ *' 0& ('

'$6& '& ,&4 0 * , * *'&0& )4&$0< (& $9 6& *'& &6& 1 0)2, )/)*7 $+4 )+*

0 2&*')+% / +/r&*& &=&/*)6& 7 $+4 2 r& 6&r + *)2&.

I $2 6&r7 *'$+;1 * r 0 9 &/* *&$/'&r Mr. Shaiwal Satyarthi 1 r ')0

6$ $9 & '& ,. H& ($0 $ ($70 *'&r& * 0' ( 0 *'& r)%'* *r$/; ('&+ (&

+&&4&4 ')0 '& ,. H& &+* ')0 6$ $9 & 0 %%&0*) +0< % )4$+/& $+4

&+/ r$%&2&+*< )+ 4)=&r&+* 2$**&r0 r&%$r4)+% *'& * ,)/. H& '$4 9&&+ 6&r7

;)+4 $+4 ,$*)&+* (') & 0 %%&0*)+% 2& *'& * )+&0 1 *')0 ,r &/* $+4

/ rr&/*)+% 27 4 9*0. I *'$+; ')2 1 r ')0 6&r$ 0 ,, r*0 ()*' *'& '& , 1

(')/' I ($0 $9 & * ,&r1 r2 *')0 ,r &/* ( r;.

I ( 4 $ 0 );& * *'$+; 27 / &$% &0< (' 1*&+ '& ,&4 $+4 %$6& 2&

0 ,, r* $* /r)*)/$ +/* r&0 4 r)+% *'& 2$;)+% * *')0 ,r &/*. L$0* 9 * + *

*'& &$0*< I ( 4 );& * *'$+; 27 1r)&+40 (' '& ,&4 $ * )+ %$*'&r)+%

4)=&r&+* )+1 r2$*) +< / &/*)+% 4$*$ $+4 % )4)+% &$/' *'&r 1r 2 *)2& *

*)2& )+ 2$;)+% *')0 ,r &/*.

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RESEARCH METHODOLOGY:

The Researcher has adopted Doctrinal Method of legal research.

SO RCES O! DATA:

"ri#ar$ so%rces incl%de &are Acts. Secondar$ So%rces' incl%des (oo)s' *o%rnals' articles'+e(sites' online data' etc.

A,MS - O& ECT,/ES:

The ai# of the researcher is to st%d$ the ins%rance polic$.

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TABLE OF INDE@

Chapter 01 ,ntrod%ction 21

3

Chapter 41 S%rrender /al%e of ins%rance polic$ 5106

Chapter 71 "aid %p /al%e of ins%rance polic$ 00107

Chapter 81 9hen sho%ld one consider paid1%p or s%rrender options in the first place 08102

Chapter 21 Concl%sion03

&i(liograph$05

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CHAPTER 1- INTRODUCTION

!inancial planners ad ise that one sho%ld caref%ll$ assess one;s need for ins%rance and the

feat%res of a polic$ (efore signing on the dotted line. An ins%rance plan (o%ght in a h%rr$ to

sa e ta< or sold ($ so#e ins%rance agent or a (an) e

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s%(*ect to the ass%red co#pleting a declaration of good health' there is no co er %ntil the

declaration has (een #ade. 4

Half+a$ thro%gh the polic$' an indi id%al #ight +ant to discontin%e it and ta)e +hate er

#one$ is d%e to hi#=her. The a#o%nt the ins%rance co#pan$ then pa$s is )no+n as thes%rrender al%e. The polic$ ceases to ecash al%e>' >s%rrender al%e> and >polic$holder?s

e@%it$>.8

S%rrender al%e is the a#o%nt the polic$holder +ill get fro# the life ins%rance co#pan$ if he

decides to e

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co#plete and the ins%red is free of all pa$#ent o(ligations' the polic$ sta$s intact %ntil ins%red?s

death or ter#ination of the polic$ is called paid1%p polic$.

"aid1%p polic$ falls into the categor$ of traditional ins%rance plans. The s%# ass%red is li#itedto the paid1%p al%e. ,t is calc%lated as the ratio of n%#(er of pre#i%#s paid to the total n%#(er

of pre#i%#s that +ere s%pposed to (e paid according to the polic$ #%ltiplied ($ the s%#

ass%red at #at%rit$ .3

9hen the pre#i%# for a life ins%rance polic$ is not paid on ti#e and it lapses' then the "olic$

ac@%ires a "aid1%p /al%e and it is considered a "aid1%p "olic$' s%ch that the S%# Ass%red of the

polic$ is red%ced in proportionate +ith the n%#(er of pre#i%#s paid and total n%#(er of

pre#i%#s of the polic$. A "aid %p "olic$ ac@%ires a "aid1%p /al%e. ,f a polic$ needs to (es%rrendered or a loan needs to (e a ailed' it is ta)en as a percentage of the "aid1%p /al%e.

CHAPTER >- SURRENDER VALUE OF INSURANCEPOLICY

S%rrendering the polic$ #eans e

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• lo+ (on%s or (enefits• +anting to get proper ins%rance thro%gh ter# life• (etter in est#ent options. 5

On s%rrendering a polic$:

• The life co er or protection ends.

• The ta< (enefit' if a ailed of on the pre#i%# paid till then' #a$ (e re ersed if

s%rrendered (efore pre#i%# has (een paid for t+o $ears and 2 $ears for L," prod%cts

after the date of co##ence#ent of polic$.

• On s%rrendering (efore the #at%rit$ date the cash al%e that $o% recei e is called the

surrender value of a polic$.

• "olicies %s%all$ ac@%ire a s%rrender al%e after pre#i%#s ha e (een paid for

three $ears.

• ,f an$ e

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9hen $o% s%rrender' the ins%rance co#pan$ has to gi e $o% so#e #one$ in ret%rn as $o% paid

so#e pre#i%#s each $ear a part of this pre#i%# +ent to+ards pro iding ris) and so#e part

+ent into in est#ents it is this in est#ent part' +hich +o%ld ha e gro+n in al%e' that +ill (e

ret%rned to $o% after appl$ing so#e s%rrender charges +hich aries fro# polic$ to polic$. Apart

fro# that' $o% #ight ha e (een eligi(le for so#e (on%s as +ell. ote that as far as the (on%s is

concerned' it is red%ced ($ a factor called s%rrender al%e factor.

,n calc%lating s%rrender al%e' the a#o%nt d%e on the polic$ and pa$a(le sho%ld (e interpreted

in fa o%r of polic$ holder. F

To %nderstand this (etter' let %s loo) at the for#%la ($ +hich ins%rance co#panies arri es at the

#one$ the$ gi e to $o%.

Surrender Value = [{(Number of prem um! pa d " Number of prem um! pa#able$ % Sum

A!!ured & ' A rued bonu!e! ) % Surrender *alue fa +or

,f , +ant to e

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,t #%st (e noted that the s%rrender al%e is gi en o%t onl$ +hen the life ins%rance polic$ has

(een in e "? " "5 ('$*-)0-0 rr&+4&r-6$ &-$+4-,$)4-,-6$ &- 1-$- )1&-)+0 r$+/&-, )/7

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o. Onl$ those policies +hich contain an e#(edded sa ings co#ponent P li)e L,"s and

endo+#ent plans P +ill partiall$ ret%rn the a#o%nt in ested for the life co er. S%rrendering

ter# plans' +hich are p%re protection co ers +ith no sa ings ele#ent' +ill res%lt in lapsation of

the polic$.

1! !urrender *alue rele*an+ f a pol #,older doe! no+ +erm na+e , ! pol #.

The s%rrender al%e ac@%ired ($ $o%r polic$ is also %sed to calc%late the loan a#o%nt $o% are

eligi(le for. So#e ins%rers grant loans against life ins%rance policies to the e-+&(0 >! ?555 " 0 rr&+4&r-6$ &-, )/7-,r&2) 2

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, )/7< 9 * 0*) &* )* r + * 2$* r)*7. T'& r&4 /&4 0 2 $00 r&4 )0

/$ &4 *'& P$)4 , 6$ & 1 *'& , )/7.• P$)4 , 6$ & )0 /$ / $*&4 $0 $ ,r , r*) + 1 ,r&2) 20 ,$)4 6&r0 0

*'& ,r&2) 20 $/* $ 7 +&&4&4 * 9& ,$)4.• I1 7 '$6& 9 %'* )+0 r$+/& , )/7 ()*' $44)*) +$ 9&+&3*0 0 /' $0

1 * r& 9 + 0&0 $+4 4)6)4&+40< *'&0& ( 4 9& 0* )+ 0 /' $ , )/7.

H (&6&r< 7 ( 4 r&*$)+ $+7 9 + 0&0 ,$)4 * 9&1 r& 7 2$4& *'&

, )/7 “,$)4- ,” $+4 ( 4 9& ,$)4 + 2$* r)*7 &+4 1 *'& , )/7

*&r2 r + 4&$*'< (')/'&6&r )0 &$r )&r• R)4&r0 0 /' $0 A//)4&+* 9&+&3* $+4 /r)*)/$ ) +&00 r)4&r0 4 + *

$/ )r& $+7 ,$)4- , 6$ &. ""

P$)4- , 6$ & $,, )&0 * *r$4)*) +$ ,r 4 /*0 0 /' $0 2 +&7 9$/; , )/)&0<&+4 (2&+* , $+0 $+4 (' & )1& )+0 r$+/&.

P$)4- , 6$ & )0 *'& r&4 /&4 $2 +* 1 0 2 $00 r&4 ,$)4 97 *'& )+0 r$+/&

/ 2,$+7< )+ /$0& *'& , )/7' 4&r 4)0/ +*)+ &0 ,$72&+* 1 ,r&2) 20. A1*&r

,$72&+* 1 *'r&& 7&$r0 1 ,r&2) 2 )+ *r$4)*) +$ )1& )+0 r$+/& , $+0< 7 r

, )/7 $ * 2$*)/$ 7 $/ )r&0 ,$)4- , 6$ &. I1 7 / +*)+ & * ,$7 1 r*'&r

,r&2) 20 *'&+ *'& ,$)4- , 6$ & 1 7 r , )/7 )+/r&$0&0 &6&r7 7&$r.

I1 1 r $+7 r&$0 +< 7 $r& +$9 & * ,$7 1 r*'&r ,r&2) 20 $1*&r *'r&& 7&$r0

1 ,r&2) 2 ,$72&+* *'&+ *'& ,$)4- , 6$ & () r&2$)+ 0$2& *'r %' *

*'& , )/7 ,&r) 4. I1 *'& ,r&2) 20 $r& 4)0/ +*)+ &4 *'&+ + 1 r*'&r 9 + 0

() 9& $44&4 * *'& , )/7. T'& 4&$*' / $)2 () 9& r&0*r)/*&4 * *'& ,$)4- ,

6$ & 1 *'& , )/7.

O+& /$+ / +*)+ & * ' 4 *'& , )/7 $+4 %&* *'& ,$)4- , 6$ & $* *'& &+4 1

*&r2 r /$+ ,* 1 r ()*'4r$($ 97 0 rr&+4&r)+% *'& , )/7. I* )0 $46)0$9 & *0 rr&+4&r *'& , )/7 )1 7 4 + * ($+* * / +*)+ &. I* () %)6& 7

$,,r )2$*& 7 r&* r+ ,&r $++ 2 + *'& 0 rr&+4&r 6$ & )1 7 ' 4 *'&

, )/7 *) *'& &+4 1 *'& *&+ r&.

"" '**,: (((.9&2 +&7$($r&./ 2 9 % )1&-)+0 r$+/&-0 rr&+4&r-,$)4 ,- $,0&- $+

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T')0 )+0 r$+/& / 6&r () / +*)+ & *) *'& &+4 1 *'& *&r2 r 4&$*' 1 *'&

, )/7' 4&r< (')/'&6&r )0 &$r )&r. T'& )+0 r$+/& / 6&r () 9& P$)4- , * *'&

r&4 /&4 0 2 $00 r&4 r *'& P$)4-U, V$ &. T'& P$)4-U, , )/7 )0 $ 0 & )%)9 &

* r&/&)6& *'& ,r , r*) +$*& 9 + 0.

P$)4-U, P )/)&0 /$+ 1 r*'&r 9& 0 rr&+4&r&4 )1 *'& , )/7' 4&r ()0'&0 *

*$;& *'& 2 +&7 *. I+ *'$* /$0&< $ /&r*$)+ 0 rr&+4&r /'$r%& )0 4&4 /*&4<

4&,&+4)+% + *'& *&+ r& &1* 1 r *'& , )/7 * 2$* r& $+4 *'& r&2$)+)+%

$2 +* /$+ 9& ,$)4 * * *'& , )/7' 4&r $0 S rr&+4&r V$ &. E6&+ $+0

/$+ 9& $6$) &4 + P$)4-U, P )/)&0. I1 *'& $+ $2 +* )0 + * ,$)4 9$/;< *'&+

*'& P$)4-U, P )/7 /$+ 9& 0 rr&+4&r&4 97 *'& )+0 r&r * r&/ 6&r *'& $+

$2 +*.">

W'&r& *'& $00 r&4 '$0 + * ,$)4 *'& ,r&2) 2 + *'& 4 & 4$*&< *'& )+0 r&r

2$7 '$6& $ /' )/& 1 r&2&4)&0:

$ Pr /&&4)+%0 1 r ,$72&+* 1 ,r&2) 2 2$7 9& 9r %'*9 C $)20 2$7 9& r& &/*&4 +*) *'& ,r&2) 2 '$0 9&&+ ,$)4/ T'& , )/7 2$7 9& 1 r1&)*&4 r 4&*&r2)+&4 1 r 9r&$/'. "?

L&* 0 *$;& $+ & $2, &: I1 7 '$6& 9 %'* $ > -7&$r )+0 r$+/& , $+ ()*'

0 2 $00 r&4 1 R0. > $;' $+4 7 $r& ,$7)+% R0. " < ,r&2) 2 $++ $ 7.

Y '$6& r&% $r 7 ,$)4 ,r&2) 20 1 r 36& 7&$r0 $+4 + ( 7 4 + * ($+* *

,$7 *'& ,r&2) 20 1 r *'& r&2$)+)+% "5 7&$r0. A00 2& *'$* *'& * *$ 9 + 0

1 R0. ?5< )0 /r&4)*&4 * 7 r , $+ 1 r *'& 36& 7&$r0< *'&+ *'& ,$)4- ,

6$ & $1*&r / 2, &*) + 1 36& 7&$r0 () 9&:

Paid-up value = [ Nu!"e# $% p#e!iu!& paid ' T$(al p#e!iu!&

pa)a"le * Su! a&&u#ed+ , "$ u& .#edi(ed (ill (/e p$li.) i& paid+0

"> '**,: (((.27)+0 r$+/&/ 9./ 2 % )4&0 ,$)4- ,-6$ &- 1-$- )1&-)+0 r$+/&-, )/7

"? C )+6$ 0 Law of Insurance, ! *' &4)*) +< > < S *' A0)$+ E4)*) +< L +4 + $*,. >! .

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).&.< 5 > >< < R0. 5 < Q R0. ?5< 9 + 0 . P$)4- , 6$ & R0.

!5< $+4 *'& 4&$*' / $)2 )+ *')0 /$0& )0 r&0*r)/*&4 * R0. !5< + 7 )1

7 /' 0& * / +*)+ & *'& , $+ ()*' * 1 r*'&r / +*r)9 *) +. A ,$)4- ,

, )/7 0&0 $ *'& $44)*) +$ 9&+&3*0 $**$/'&4 * *'& , )/7 0 /' $0 4 9 &

$//)4&+* / 6&r $+4 /r)*)/$ ) +&00 / 6&r $2 +% *'&r0. T')0 r&4 /&4

)+0 r$+/& / 6&r () / +*)+ & *) *'& &+4 1 *'& *&r2 r 4&$*' 1 *'&

, )/7' 4&r< (')/'&6&r )0 &$r )&r. T'& )+0 r$+/& / 6&r () 9& ,$)4- , * *'&

r&4 /&4 0 2 $00 r&4 r *'& ,$)4- , 6$ &. I* )0 $46)0$9 & * 0&,$r$*& 7 r

)+0 r$+/& $+4 )+6&0*2&+* +&&4. "

"'**,: $2&. r%.)+ K+ ( &4%&C&+*&r P$)4 ,6$ & 1$*r$4)*) +$ )+0 r$+/&, )/7.$0,

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CHAPTER - WHEN SHOULD ONE CONSIDER PAID-UPOR SURRENDER OPTIONS IN THE FIRST PLACE

D fferen e be+/een Surrender n2 and Ma3 n2 4ol # 4a d up

Surrender a 4ol #Ma3e a 4ol # 4a d5p

S+op pa# n2 prem um!mmed a+el#. Yes Yes

Ge+ mone# mmed a+el#.Yes 1!raction of pre#i%#s

paid o

1n!uran e o*er on+ nue!. oYes for red%ceda#o%nt

Ge+ mone# a+ +,e end of +,e+enure. o' rather i##ediatel$ Yes the paid al%e

To #a)e a polic$ paid1%p #eans to si#pl$ stop pa$ing pre#i%#s. The polic$ does not

cease. Yo% get a red%ced co er on death or at #at%rit$. On the other hand' to s%rrender a

polic$ #eans to ret%rn the polic$ and +al) off +ith +hate er little pa$o%t $o% get'

hopef%ll$ to in est in other a en%es +here the$?d earn (etter.

Ca!e (a$ : ,f $o% ha e planned $o%r goal s properl$ ta)ing realistic inflation rates into

acco%nt' calc%lating the a#o%nt need to (e sa ed each $ear or each #onth and then

p%rchased a life ins%rance prod%ct +ith an appro

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contin%e the polic$. Of co%rse $o% need to in est the rest of the #one$ in appropriate

instr%#ents. The polic$ can ser e as a de(t instr%#ent offering $o% li#ited (%t g%aranteed'

ta

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CHAPTER 5- CONCLUSION

S%rrendering the polic$ #eans e

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BIBLIOGRAPHY

OOKS2

M N Sr)+)6$0$+ 0 Principles of Insurance Law, *' &4)*) +, > < L& )0 N& )0

B **&r( r*'0 W$4'($< N$%, r. C )+6$ 0Law of Insurance, ! *' &4)*) +< > < S *' A0)$+ E4)*) +< L +4 +. A6*$r S)+%'< Law of Insurance < >+4 &4)*) +< > " < E$0*&r+ B ; C 2,$+7<

L /;+ (.

WE SITES2

• '**,: (((.2&4)+4)$.+&* )+0 r$+/& 0 rr&+4&r-6$ &-,$)4- ,-6$ &.'*2• '**,: (((.)+6&0* ,&4)$./ 2 *&r20 / /$0'0 rr&+4&r6$ &.$0,• '**,: (((.2 +&7/ +*r ./ 2 % 00$r7 )+0 r$+/& ,$)4 ,-6$ & > .'*2•

'**,: &/ + 2)/*)2&0.)+4)$*)2&0./ 2 4&3+)*) + ,$)4- ,-, )/7• '**,: (((.*'&(&$ *'()0'&r./ 2 > "? " "5 ('$*-)0-0 rr&+4&r-6$ &-$+4-,$)4- ,-

6$ &- 1-$- )1&-)+0 r$+/&-, )/7• '**,: 1r&&3+/$ ./ 2 )+0 r$+/&-, )/7-0 rr&+4&r-6$ &-,$)4- ,-6$ &-/$ / $* r->• '**,: (((.27)+0 r$+/&/ 9./ 2 % )4&0 ,$)4- ,-6$ &- 1-$- )1&-)+0 r$+/&-, )/7• '**,: $2&. r%.)+ K+ ( &4%&C&+*&r P$)4 ,6$ & 1$*r$4)*) +$ )+0 r$+/&, )/7.$0,

"! # P $ % &

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