Insurance Terminology Set 1 - 1678090606 1

To Buy Gaurav Sir's Current Affairs, Static GK & Banking Awareness (Static) Courses, click on the
below links (गौरव सर के करट अफेयस, े िटक जीके और बिकंग अवेयरनेस ( े िटक) कोसज खरीदने के िलए, नीचे
िदए गए िलंक पर क कर) -
1. Gaurav Sir's Current Affairs
2. Gaurav Sir's Static GK
3. Gaurav Sir’s Banking Awareness (Static)
For any Assistance Please Feel Free to Contact at - 95544 43351
To know more, download Study IQ APP

https://play.google.com/store/apps/details?id=com.studyiq.android
To Download Current Affairs PDFs join this Telegram Group of Dr. Gaurav Garg - https://t.me/StudyIQPremiumUsers
To Buy Gaurav Sir's Current Affairs click on the below link -
https://studyiq.com/course-detail/gaurav-sir-current-affairs

Insurance Terminology Set-1 by Dr. Gaurav Garg
Claim settlement ratio

● The claim settlement ratio is the proportion of the number of claims paid by the insurance
company against the number of claims received during the financial year.
● “Claim Settlement Ratio (CSR) = (Total number of claims paid in a year ÷ Total number of claims received
in a year) x 100.”
● Claims may be rejected by life insurance companies for various reasons such as misrepresentation of facts,
fraud, impersonation (acting), etc. It is hence important to ensure that you provide accurate information to the
insurer at the time of purchase.
● Claims can be of different types
○ Maturity Claims: when the policy tenure ends and the policyholder survives the whole policy tenure a
certain amount is paid to the policyholder itself. Maturity claims are only paid when the policy term ends
and the premiums are paid on time.
○ Death Claims: In death claims, the applicant can make a request for death benefits upon the death of the
policyholder.
● IRDAI Annual Report ( FY 2022)
● Claim settlement ratio by numbers OR Claim settlement ratio by value ?

○ Both are important
1 © Copyright 2023 Study IQ

What is a Surrender Value?
● A surrender value is usually the sum owed by the life insurance provider when you decide to surrender or give up
on your life insurance policy.
● Whenever you surrender your life insurance policy, you receive a certain amount of premiums that you regularly
paid back from the insurance provider. This receipt of payment is known as a surrender value.
● Life insurance is a long term commitment and there are some unfortunate times when you might have to
surrender your policy.
● In other words, it means terminating the policy before its maturity.
● So, if you surrender a policy in the mid-term, you would get a sum (surrender value) of what has been allocated
towards savings and earnings. Besides, a surrender charge also gets deducted from this amount, which varies
from policy to policy.
● A recent directive by the Insurance Regulatory and Development Authority of India (Irdai) states that the
policyholder can’t levy any surrender charges if the policy is exited after five years.
● Types of surrender value - There are two types of surrender value—guaranteed surrender value and special
surrender value
○ Guaranteed surrender value
■ The guaranteed surrender value is payable to the policyholder only after the completion of three
years. This value makes up to only 30% of the premiums paid towards the plan. Moreover, it
excludes the premium paid for the first year, additional costs paid towards riders and bonuses
(you might have received).
■ For instance, suppose you paid Rs 60,000 (Rs 20,000 per year x 3) in the initial three years for a
sum assured of Rs 10 lakh, the minimum surrender value you can get is 30% of Rs 40,000, which
is ₹12,000 (excludes the first year premium).
■ Policies like term plans, which do not offer any maturity benefits, do not have a surrender value.
■ If you choose to terminate these policies mid-term, you are not eligible to receive any kind of
pay-out.
■ Life insurance policies such as Unit-Linked Insurance Plans (ULIPs) or endowment plans will
provide you with a surrender value as long as you have paid your premiums for at least three
years.
○ Special surrender value

■ To understand this, one needs to first know what paid-up value is. Suppose the policyholder stops
paying premium after a specific period, the policy would continue, but at a lower sum assured,
which is termed as paid-up value.
■ The paid-up value is calculated as original sum assured multiplied by the quotient of the number
of paid premiums and number of payable premiums.
■ 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.
■ For example, you pay INR 15,000 per year. You have a sum assured of INR 3,00,000 and the
policy tenure is 20 years. You stop paying premiums after 4 years.
● Let’s calculate your paid-up value.
Paid-Up Value = Original Sum Assured x (No. of Premiums Paid / No. of Premiums
Payable)
Paid-Up Value = 3,00,000 x (4/20)
Paid-Up Value = 3,00,000 (x1/5)
Paid-Up Value = INR 60,000
■ To calculate the special surrender value, you also need to know your surrender value factor.
The number remains at 0 for the first three years. It then increases every subsequent year. Various
companies decide their own surrender value factor. For example assume you stop paying
premiums in/ from the fourth year, we can use a surrender value factor of 30%. In the four years,
you earn a bonus of INR 30,000 Let’s use this information to calculate your special surrender
value.

● Special Surrender Value = (Paid-Up Value + Bonus) x Surrender Value Factor
Special Surrender Value = (60,000 + 30,000) x (30/100)
Special Surrender Value = 90,000 x (30/100)
Special Surrender Value = INR 27,000
● Why do people surrender their policies?

○ Lack of Money
○ Urgent need of money
○ Better option than surrendering the policy is to take a loan against your policy.
○ No tax exemption on policy premiums once surrendered.
Cash value of a policy

● Your policy’s cash value refers to the actual amount your policy is worth as a direct result of the premiums paid
and the returns earned on that amount. The surrender value, on the other hand, refers to the amount you will
receive when you terminate your policy early. It is only a part of the actual cash value since the insurance
company will not return the initial premium or any bonuses.
● Cash value feature is not applicable in the case of term insurance policies.
● Endowment plan

To Buy Gaurav Sir's Current Affairs click on the below link -
https://studyiq.com/course-detail/gaurav-sir-current-affairs

To Buy Gaurav Sir's Current Affairs, Static GK & Banking Awareness (Static) Courses, click on the
below links (गौरव सर के करट अफेयस, े िटक जीके और बिकंग अवेयरनेस ( े िटक) कोसज खरीदने के िलए, नीचे
िदए गए िलंक पर क कर) -
1. Gaurav Sir's Current Affairs
2. Gaurav Sir's Static GK
3. Gaurav Sir’s Banking Awareness (Static)


Insurance Terminology Set 1 - 1678090606 1

Uploaded by

Copyright:

Available Formats

Insurance Terminology Set 1 - 1678090606 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Insurance Terminology Set 1 - 1678090606 1

Uploaded by

Copyright:

Available Formats

To Buy Gaurav Sir's Current Affairs, Static GK & Banking Awareness (Static) Courses, click on the

For any Assistance Please Feel Free to Contact at - 95544 43351

To know more, download Study IQ APP

For any Assistance Please Feel Free to Contact at - 95544 43351

To know more, download Study IQ APP

Claim settlement ratio

● IRDAI Annual Report ( FY 2022)

● Claim settlement ratio by numbers OR Claim settlement ratio by value ?

1 © Copyright 2023 Study IQ

○ Special surrender value

2 © Copyright 2023 Study IQ

● Why do people surrender their policies?

Cash value of a policy

3 © Copyright 2023 Study IQ

For any Assistance Please Feel Free to Contact at - 95544 43351

To know more, download Study IQ APP

For any Assistance Please Feel Free to Contact at - 95544 43351

To know more, download Study IQ APP

You might also like