What is a Surrender value and paid-up value?
Surrender value is what you get if you exit a savings-linked life policy early; paid-up value is the reduced cover you keep if you stop paying premiums after a point but do not surrender. Pure term plans usually have neither. The free-look period lets you cancel a new policy soon after buying, for a refund minus small charges.
Surrender vs paid-up
Surrendering ends the policy and pays out a surrender value, which in early years is often much less than the premiums paid. Making a policy 'paid-up' instead stops future premiums and continues a reduced sum assured based on what you have already paid.
These values apply to savings/endowment-style plans that build value. Pure term insurance is protection-only and typically has no surrender or paid-up value.
Free-look period
Right after buying, the free-look window lets you review the policy and cancel for a refund, minus small deductions, if it is not what you expected. It is a short cooling-off period, distinct from surrendering later.
Example
A policyholder who can no longer pay an endowment plan makes it paid-up: premiums stop and a reduced sum assured continues, rather than surrendering for a low early exit value.
Common mistakes
- Surrendering early and losing a large part of premiums, when making the policy paid-up would have preserved some cover.
- Missing the free-look window to exit a mis-sold or unsuitable policy.
- Expecting surrender value from a pure term plan, which usually has none.
Frequently asked questions
Will I get all my money back if I surrender early?
Usually not. Early surrender values are often well below total premiums paid, especially in the first years. Compare surrender value against making the policy paid-up.
What is the free-look period for?
It is a short window after purchase to review the policy and cancel for a refund minus small charges if it does not suit you. Check your document for the exact window.