Definition: It is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity.

Description: A mid-term surrender would result in the policyholder getting a sum of what has been allocated towards savings and the earnings thereon. From this will be deducted a surrender charge, which varies from policy to policy.

As per a recent Insurance and Regulatory Development Authority (IRDA) directive, life insurance companies have been asked not to levy surrender charges if the policyholder chooses to terminate the cover after five years.

A regular premium policy acquires surrender value after the policyholder has paid the premiums continuously for three years. However, you need to make sure that you keep track of this policy till it matures. Once you decide to exit the insurance policy, all the benefits associated with it, including the protection cover, will cease to exist.

Also See: 3rd Party Insurance, No Claim Bonus, Premium, IRDA