What does surrender value on ILP means? Does it includes the sum assured + investment returns?

Hi anon,

The surrender value on an ILP (or any policy, for that matter), is the amount of money you get if your terminate the policy on the date of the letter. For an ILP, that is the value of the funds. If held for 20 years, it is possible for returns to compound dramatically depending on fund performance, but you might want to check on the 'premium paid' statement; we need to distinguish that from total premiums paid, which is another matter entirely. I'm hoping that is $17K total premiums paid, but for $17K paid equally over 20 years to compound to $68K requires a 12% p.a. return, which is not that easy to achieve. So do check out the figures, I'm actually a little worried that $17K is not the total premiums paid.

Depending on where your funds are invested, the value of that $68K could have risen or fallen by now. So take $68K as a ballpark figure.

The surrender value of an investment-linked policy refers to the money that you will receive when you terminate the policy (hence the term "surrender").

Generally, the policy illustration will show this information based on the number of years that you have been holding onto the policy for, at two illustrated rates of return. For the most part, take note that these values are non-guaranteed (since investment yields non-guaranteed returns only).

In order to breakeven on your capital, you will need to invest into investment-linked funds that are capable of growing your capital. And yes, this is possible with good investment strategy and techniques. Otherwise, you shouldn't be investing in the first place.

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