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When you stop a life insurance savings policy before it matures — “surrender” it — the insurer pays you its surrender value. Your policy’s own surrender value table decides the exact amount, but IRDAI rules set a floor: for a regular-premium policy surrendered in its second year, for example, at least 30% of the premiums paid. Below are the rules, a worked example, and a surrender letter you can fill in.
What surrender means
Surrender is ending the whole policy before its term is over and taking the value built up so far. From that day the cover ends — nothing is paid if something happens later. The IRDAI (Insurance Products) Regulations, 2024 define it as “complete withdrawal or termination of the entire policy contract”.
Which policies have a surrender value? Savings policies such as endowment, money-back and pension plans. The rules do not require a guaranteed surrender value for pure risk policies such as plain term insurance. Unit-linked policies (ULIPs) follow separate rules, covered further down.
The minimum you must get: guaranteed surrender value
For a non-linked savings policy with yearly (regular) premiums, a guaranteed surrender value (GSV) applies once premiums have been paid for at least two consecutive years. Under Schedule I, clause 4(A) of the 2024 Regulations, the GSV must be at least:
| If you surrender | Minimum GSV (share of total premiums paid, less survival benefits already received) |
|---|---|
| In policy year 2 | 30% |
| In year 3 | 35% |
| In years 4 to 7 | 50% |
| From year 8 | Rising smoothly to at least 90% in the last two years |
For a single-premium policy: at least 75% if surrendered within the third policy year, and at least 90% in the fourth year and in the last two years. If bonuses or guaranteed additions have been added to the policy, their surrender value is added on top of the GSV.
Special surrender value: you get the higher of the two
Insurers also work out a special surrender value (SSV), based on the value the policy has actually built up with the insurer (its asset share); it must be at least the present value of the paid-up sum assured and other paid-up or accrued benefits (Master Circular clause 26.4.1). The rules say the surrender value paid is the higher of the GSV and the SSV (Schedule I, clause 4(A)(a)(5)).
- Under IRDAI’s Master Circular on Life Insurance Products (12 June 2024, clause 26.4.2), the SSV becomes payable once the first policy year is complete and one full year’s premium has been paid. For policies with a premium term under 5 years and for single-premium policies, it applies as soon as the first full year’s (or the single) premium is received.
- The benefit illustration — the year-by-year projection you sign when buying — must show the GSV, SSV and surrender value for each policy year separately (clause 26.5).
The percentages above are legal minimums only. What your own policy pays is in its surrender value table and benefit illustration; for the exact figure, ask the insurer for a surrender value quotation.
A worked example (imaginary)
Lakshmi from Vijayawada (name imaginary) pays ₹24,000 a year for a 15-year endowment policy and has not received any survival benefit.
| When she surrenders | Total premiums paid | Minimum GSV |
|---|---|---|
| Year 2, after 2 premiums | ₹48,000 | 30% = ₹14,400 |
| Year 3, after 3 premiums | ₹72,000 | 35% = ₹25,200 |
| Year 5, after 5 premiums | ₹1,20,000 | 50% = ₹60,000 |
If the insurer’s SSV in year 5 were, say, ₹68,000, she would get the higher figure, ₹68,000. These numbers are made up to show the working — and they show that even after five years she gets back less than the ₹1,20,000 she paid.
Stopping a ULIP in the first five years
A ULIP has a lock-in period of five completed years from the start date. If you surrender during the lock-in, the fund value minus discontinuance charges moves to a “discontinued policy fund”, the life cover stops, and the money is paid only when the lock-in ends (2024 Regulations, Schedule I clause 4(B), and definitions 1.23–1.24).
The rules also cap the discontinuance charge. For a ULIP with yearly premiums (AP = annual premium, FV = fund value):
| Policy year of discontinuance | Annual premium up to ₹50,000 — maximum charge | Above ₹50,000 — maximum charge |
|---|---|---|
| 1 | Lower of 20% of AP or FV, max ₹3,000 | 6%, max ₹6,000 |
| 2 | 15%, max ₹2,000 | 4%, max ₹5,000 |
| 3 | 10%, max ₹1,500 | 3%, max ₹4,000 |
| 4 | 5%, max ₹1,000 | 2%, max ₹2,000 |
| 5 onwards | Nil | Nil |
Single-premium ULIPs have separate, lower caps — look for “discontinuance charges” in your policy document.
Alternatives to surrendering
- Make it paid-up: once a policy has acquired a surrender value, it does not lapse if you stop paying; it continues with a reduced (paid-up) sum assured (Schedule I, clause 4(A)(a)(6)). This does not apply if the paid-up sum assured is very small (for example, under ₹2,500).
- Revive it later: a policy that stopped because premiums were not paid can be restored within 5 years of the first unpaid premium for non-linked policies, or 3 years for ULIPs, by paying the arrears (with any late fee or interest under the policy terms); the insurer may ask about your health (2024 Regulations, definitions 1.10, 1.28, 1.39). If money is tight only for a few months, this is worth weighing before surrendering.
- Take a policy loan: non-linked savings policies that offer a surrender value must offer a loan against it (Master Circular clause 27). The policy and its cover continue; the loan carries interest.
Which option suits you depends on your needs — you can ask the insurer for all three figures in writing and compare them.
About tax: surrender money, or a tax deduction you earlier claimed for the premiums, may have income-tax consequences. Income-tax rules are outside this article — before surrendering, check how tax applies to your policy in official Income Tax Department information or with a tax professional.
How to surrender: sample letter
Most insurers have their own surrender form, at the branch or on their website. You can send the letter below with that form. Under the service standards in IRDAI’s Master Circular on Protection of Policyholders’ Interests, a surrender or partial withdrawal is to be completed within 7 days.
Can you do it online? Many insurers let you raise a surrender request through their customer portal or mobile app. IRDAI has told all insurers to try to set up technology that lets policyholders submit service requests online and track their status (Master Circular on Protection of Policyholders’ Interests, page 146, para 19). This is not a strict rule, so the option depends on your insurer. Look for a “Service request” or “Surrender” option on the insurer’s official website or app, and type the website address yourself instead of tapping links in an SMS or email. Online or at the branch, find out from the insurer how much surrender value you will get before you send the request, and keep the request number.
Policy surrender request letter
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The Policy Servicing Department,
Date:
Subject: Request to surrender policy no.
Dear Sir/Madam,
I am the policyholder of the above policy, which started on . I wish to surrender the policy and receive its surrender value.
Policyholder name:
Please pay the surrender value to my bank account:
Account holder name:
Account number:
IFSC:
I enclose your surrender form, filled in and signed, along with: .
Please acknowledge this request and send me the calculation of the surrender value paid.
Yours faithfully,
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This is only a sample. Change it to fit your situation.
Words you will see
| Word | Plain meaning |
|---|---|
| Surrender value | What the insurer pays if you end the policy early |
| GSV (guaranteed surrender value) | The minimum surrender amount set by the rules |
| SSV (special surrender value) | The insurer’s figure based on the value built up; paid if higher than the GSV |
| Paid-up policy | A policy that carries on with a smaller sum assured after you stop paying |
| Benefit illustration | The year-by-year projection given at purchase, including surrender values |
| Lock-in period (ULIP) | The first five years, when ULIP money cannot be taken out |
Myths and facts
| Myth | Fact |
|---|---|
| Surrendering returns all the premiums I paid | In the early years you get back only part of it; the minimums are in the table above |
| Stop in year one and you get nothing | The GSV needs two years, but Master Circular clause 26.4.2 makes an SSV payable once the first policy year is complete and one full year’s premium has been received; how much depends on the policy |
| I can exit a ULIP any time and get the money at once | If you exit during the five-year lock-in, the money is paid only after the lock-in ends |
| Term insurance also has a surrender value | The GSV rule does not apply to pure risk policies; check your own policy document |
Check before you surrender
- Have you looked at the surrender value table and benefit illustration in your policy papers?
- Have you got today’s surrender figure from the insurer in writing?
- Have you also asked for the paid-up sum assured and the loan amount available?
- The cover ends when you surrender — does your family have other cover?
- If it is a ULIP, is the five-year lock-in over?
- If you hand in the original policy document, have you kept a copy and a receipt for your letter?
If the money does not arrive within 7 days, or the figure looks wrong, you can complain to the insurer’s grievance department — see how to complain.
Sources
- IRDAI (Insurance Products) Regulations, 2024 (Gazette, 22-03-2024; in force from 1 April 2024): definitions 1.16, 1.17, 1.23, 1.24; Schedule I clause 4(A) — GSV percentages, higher of GSV/SSV, paid-up; clause 4(B) — ULIPs (Gazette pages 33–35); definitions 1.10, 1.28, 1.39 — revival; ULIP discontinuance charge caps (Gazette pages 29–30)
- IRDAI Master Circular on Life Insurance Products, 12-06-2024 (Ref IRDAI/ACTL/MSTCIR/MISC/89/6/2024): clause 26 (SSV, benefit illustration), clause 27 (policy loan)
- IRDAI Master Circular on Protection of Policyholders’ Interests, 05-09-2024: Citizens’ Charter — surrender / partial withdrawal in 7 days (page 152)
All sources checked on 25 October 2026. Last updated: 25 October 2026.