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

Mrs. Latha Rao, aged 52, is considering surrendering her traditional endowment policy after 4 years of premium payment. She asks about the 'guaranteed surrender value' under IRDAI rules. Which statement is correct?

A traditional life policy acquires a guaranteed surrender value only after premiums have been paid for a minimum period, generally two or three years depending on policy term. The value is a percentage of premiums paid, not the full amount, so Mrs. Rao's policy qualifies after four years.

  1. AA policy acquires a guaranteed surrender value only after premiums have been paid for at least the minimum period, such as two or three years depending on the policy termCorrect
  2. BA guaranteed surrender value is available from the first month of any life policy
  3. CSurrender value is always equal to 100% of premiums paid
  4. DA policy never acquires a surrender value if it has bonuses

Explanation

Under IRDAI regulations a traditional life policy acquires a guaranteed surrender value once the minimum premium-paying period is completed, typically two years for longer terms and three years for some. It is a percentage of premiums paid, not 100%, and bonuses can add to the special surrender value rather than remove it.

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