Insurance Awareness - Life Insurance - LIC
In Whole Life Insurance, what is the effect of surrendering the policy before death?
In Whole Life Insurance, what is the effect of surrendering the policy before death?
medium Q5 of 15
Step-by-Step Solution
Step 1: Understand surrender in Whole Life Insurance
Surrendering means terminating the policy before death, usually resulting in payment of the cash value minus charges.Step 2: Evaluate options
The policyholder receives the accumulated cash value minus any surrender charges correctly states that the policyholder receives the cash value minus surrender charges. The policyholder receives the full sum assured immediately is incorrect as full sum assured is paid only on death. The policy continues without any change is wrong because surrender terminates the policy. The insurer pays a bonus equal to the premiums paid is incorrect as bonuses are not paid on surrender.Final Answer:
The policyholder receives the accumulated cash value minus any surrender charges → Option AQuick Check:
Surrender value is cash value less charges, confirming The policyholder receives the accumulated cash value minus any surrender charges as correct.
Quick Trick: Surrender = Cash value minus charges paid to policyholder.
Common Mistakes:
MISTAKES- Assuming full sum assured or bonuses are paid on surrender.
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