surrender value
Also called: nilai penyerahan
The money received if the policyholder stops the insurance before maturity.
What it means
Surrender value is the amount of money paid by the insurance company to the policyholder if a life insurance policy is terminated before the contract period ends. This value usually exists only in insurance products that have an investment element or cash value, such as unit-linked or endowment life insurance. The amount of the surrender value is already calculated in the policy table and is generally much smaller than the total premiums already paid, especially in the early years. In Indonesia, this value can only be withdrawn according to the policy terms, for example after the policy has been active for several years.
Why it matters for families
The surrender value determines how much money a family can get if forced to stop paying premiums. Many people think all premiums can be returned, when in fact in the first year the surrender value can be zero or very small. If a family misunderstands this, they can lose most of the money already deposited and the insurance protection at the same time. Therefore, know the surrender value table before buying a product with an investment element.
Example
For example, a unit-linked life policy with a premium of Rp1 million per month. After two years, total premiums are Rp24 million, but the surrender value stated in the policy might be only around Rp8 million because acquisition costs and insurance costs have been deducted. The exact figure differs for each policy and must be checked in the illustration table, not assumed.
Common misunderstanding
Many think surrender value equals the total premiums already paid. The correction: surrender value is the net value after costs, and is often much lower early in the policy period.