Jeevan Saral Surrender

109

Special Surrender Value under Jeevan Saral Plan (T- 165).

Jeevan Saral Plan (T-165) was introduced with effect from 16th February 2004 vide our circular Actl/1934/4 dated 12.02.2004.

As per the policy conditions, the policy can be surrendered after it has been in force for at least 3 full years. The greater of the Guaranteed Surrender Value or Special Surrender Value is payable as Surrender Value under the policy.

In terms of these provisions the Special Surrender Value shall be the sum of (a) Discounted Value or Accumulated Value of 80% / 90% / 100% of the maturity sum assured, as the case may be, and (b) Loyalty Additions, if any. There is also a provision for partial surrenders, any time after completion of three years or more from the date of commencement, provided premiums have been paid for at least three full years. It was stated in the introductory circular that the rate of interest to be used for discounting or accumulating under this plan, as the case may be, will be announced by the Corporation at the start of every financial year.

It has been decided to declare 7.75% as the interim rate of interest for the current financial year for calculating the Discounted Value or Accumulated Value for calculation of Special Surrender Value under this plan.

The procedure for determining the Special Surrender Value under this plan shall be as under:

STEP 1 : Determine the period for which Premiums have been paid, i.e. the period from DOC (Date of Commencement) to the due date of First Unpaid Premium (FUP).

STEP 2 : Determine the Maturity Sum Assured. The maturity sum assured corresponding to the term for which premiums have been paid under the policy will be the Maturity Sum Assured available under the policy. If the premiums have been paid for a fraction of a year, the maturity sum assured shall be worked out by way of mathematical interpolation.

STEP 3 : Determine the Amount for Accumulation/ Discounting.

The Amount to be used to calculate the Accumulated Value or the Discounted Value shall then be worked out as under :

Number of years premiums paid Amount for Accumulation/ Discounting Less than 4 years 80% of Maturity S.A. 4 years or more but less than 5 years 90% of Maturity S.A. 5 years or more 100% of Maturity S.A.

STEP 4 : Determine whether Accumulated Value OR Discounted Value of the above Maturity Sum Assured is to be calculated. The duration from DOC to DOS (Date of Surrender) has to be worked out and

• Accumulated Value shall be calculated if the duration elapsed from the DOC to the DOS is more than the term for which premiums have been paid. • Discounted Value shall be calculated if the duration elapsed from the DOC to the DOS is less than the term for which premiums have been paid.

STEP 5 : The Amount worked out at STEP 3 above shall then be accumulated or discounted, as the case may be. The formulae for calculating the accumulating factor or discounting factor are given below : Accumulation factor = (1+i) ^ (n/12)

Discounting factor = (1+i) ^ (-) (n/12)

Where ‘i’ is the rate of interest p.a. and ‘n’ is period in complete months from the due date of FUP to DOS. Fraction of a month is to be ignored.

The Accumulated Value or Discounted Value shall be derived by multiplying the relevant accumulation factor or discounting factor to the Amount, calculated as per STEP 3 above.

STEP 6 : The Special Surrender Value shall be the sum of Accumulated Value or Discounted Value and Loyalty Additions, if any.

We are providing two illustrations in the Annexure 1 for clarifying the procedure of calculation of Accumulated Value and Discounted Value, required for working out Special Surrender Value available under the policy. The Accumulation factors for 1 to 18 months and Discounting Factors for 1 to 11 months are enclosed as Annexure 2.

Please acknowledge the receipt.

EXECUTIVE DIRECTOR (ACTUARIAL)

20.03.2004 20.03.2007 20.06.2007 25.08.2007 20.03.2008 ________________________________________________________________ DOC 3 FUP DOS 4

Age at entry – 30 years Premium per month - Rs.300/- DOC - 20/03/2004 Mode – Quarterly FUP - 20/06/2007 DOS - 25/08/2007

STEP 1 : In the above case, premiums have been paid for 3 years and 3 months.

STEP 2 : The Maturity Sum Assured corresponding to the term for which premiums have been paid has to be calculated as on 20.06.2007 as under :

As per Annexure 1 to the introductory circular, Maturity Sum Assured for premium of Rs.100 p.m. Term 3 years - Rs.2,561/- Term 4 years - Rs.3,644/-

So the Maturity Sum Assured for a premium of Rs. 300/- p.m. will be Term 3 years - Rs.7,683/- Term 4 years - Rs.10,932/-

Hence, the Maturity Sum Assured (by mathematical interpolation) as on 20/06/2007 is

= 7683 + 3 (10,932 – 7,683) 12 = 7683 + 3 (3249) 12 = 8,495.25

STEP 3 : Since the premiums have been paid for less than 4 years, Amount for accumulation/discounting shall be 80% of the above maturity sum assured, i.e. 80% of Rs.8495.25 = Rs.6,796.20.

STEP 4 : The premiums have been paid for 3 years and 3 months and the duration from DOC to DOS is 3 years 5 months. So the duration from DOC to DOS is MORE than the term for which premiums have been paid.

Therefore, the Amount worked out at STEP 3 shall be accumulated.

STEP 5 : Duration from FUP (20/06/2007) to DOS (25/08/2007) = 2 months (taking complete months only) Accumulating factor for 2 months = (1+ 0.775)^ (2/12) = 1.01252.

The accumulated value of the amount for the said duration as on 25.08.2007 = Rs. 6796.20 x 1.01252 = Rs. 6881.29 = Rs. 6,881/- (to nearest rupee) …..2

: 2 :

Illustration 2 :

18.04.2004 18.04.2007 04.07.2007 18.10.2007 18.04.2008 __________________________________________________________________ DOC 3 DOS FUP 4

Age at entry – 51 years Premium per month - Rs.450/- DOC - 18/04/2004 Mode – Half-yearly FUP - 18/10/2007 DOS - 04/07/2007

STEP 1 : In the above case, premiums have been paid for 3 years and 6 months.

STEP 2 : The Maturity Sum Assured corresponding to the term for which premiums have been paid has to be calculated as on 18.10.2007 as under :-

As per Annexure 1 to the introductory circular, Maturity Sum Assured for premium of Rs.100 p.m. Term 3 years - Rs.2,038/- Term 4 years - Rs.2,892/-

So the Maturity Sum Assured for a premium of Rs.450 p.m. will be Term 3 years - Rs.9,171/- Term 4 years - Rs.13,014/-

Hence, the Maturity Sum Assured (by mathematical interpolation) as on 18.10.2007 is = 9171 + 6 (13,014 – 9,171) 12 = 9171 + 6 (3843) 12 = Rs.11,092.50/-

STEP 3 : Since the premiums have been paid for less than 4 years, Amount for accumulation/ discounting shall be 80% of the above maturity sum assured, i.e. 80% of Rs.11,092.50 = Rs.8,874/-.

STEP 4 : The premiums have been paid for 3 years and 6 months and the duration from DOC to DOS is 3 years 2 ½ months (approx.). So the duration from DOC to DOS is LESS than the term for which premiums have been paid.

Therefore, the Amount worked out at STEP 3 shall be discounted.

STEP 5 : Duration from DOS (04/07/2007) to FUP (18/10/2007) = 3 months (taking complete months only) Discounting factor for 3 months = (1+ 0.775)^ (-) (3/12) = 0.98151

The discounted value of the amount for the said duration as on 04.07.2007 = Rs. 8874 x 0.98151 = Rs. 8709.92 = Rs.8,710/- (to nearest rupee)

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