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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products

Mr. Sharma holds an endowment policy with sum assured Rs 10,00,000 and annual premium Rs 80,000 for a 20-year term. It has acquired a guaranteed surrender value (GSV) factor of 40% of premiums paid for a policy surrendered in year 6 after 5 full years of premiums, with premiums excluding first-year premium counted. Assuming only the 4 premiums after the first are counted (excluding first year's premium), what is the GSV?

The guaranteed surrender value is Rs 1,28,000. Excluding the first-year premium leaves four premiums of Rs 80,000, totalling Rs 3,20,000, and 40% of this base gives the GSV. Including the first-year premium would wrongly raise the figure to Rs 1,60,000.

  1. ARs 1,28,000Correct
  2. BRs 1,60,000
  3. CRs 2,00,000
  4. DRs 3,20,000

Explanation

The data state that the first-year premium is excluded, leaving 4 premiums counted: 4 x 80,000 = Rs 3,20,000. 40% of that is Rs 1,28,000. Using all 5 premiums would give Rs 1,60,000, which wrongly includes the first-year premium. Rs 3,20,000 is the base before applying the factor.

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