Glossary
Surrender value
Surrender value is the amount an insurer pays a policyholder who cancels a life policy with a savings element before it matures or a claim is made.
Surrender value explained
Some life insurance products, such as whole life and endowment policies, build up a cash value over time from the premiums paid. If the policyholder decides to end the policy early, the insurer pays out that accumulated value, less any charges, as the surrender value.
Surrender values are usually low in the first years of a policy, because early premiums cover set-up costs and the cost of cover, and grow later. For example, a policy paying K200 a month may have little or no surrender value after one year but a meaningful value after ten.
Pure protection products such as term life normally have no surrender value, because there is no savings component. The policy document states whether a surrender value exists and how it is calculated.
Why it matters in life insurance
Policyholders in Zambia sometimes surrender policies during financial pressure, so insurers need to quote surrender values accurately and quickly. Ontech LifeI ERP calculates surrender and paid-up values from the product's configured rules so staff and the client portal show the same figure.