How much Cash Value for Life Insurance? The debate continues

financialexpress.com:

Recently, the Insurance Regulatory and Development Authority of India (IRDA) declared that they won’t be changing the rules about surrender value for life insurance policies in the country. This decision came after some uncertainty when IRDA was thinking about increasing surrender values back in March.

This announcement brought relief to many life insurance companies who were worried about potential changes. But what about the policy holders? The data indicates that over 50% of life insurance policies in India do not reach maturity. They are either surrendered or get lapsed because people can’t or don’t want to keep paying premiums. This trend is observed globally, regardless of variations in economic development and life insurance market dynamics.

This high volume of surrendered and lapsed policies raises questions about the reasons behind such untimely exits and underscores the significance of surrender value for policyholders. Why do so many people surrender or let their policies lapse? And what does this mean for policyholders who might be relying on their insurance? These are key issues that highlight the importance of surrender value for life insurance policy holders.

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In life insurance, ‘surrender value’ is a term every policy holder should know about. It’s like a safety net for policyholders when money is tight. If you can’t keep paying your premiums, surrender value ensures you still get some benefits. The Insurance Act, 1938, states that the policyholder must get some money back if they stop paying premiums and want to exit the policy. This money is often called ‘cash value’ and is a part of the premium amount already paid by the policyholder