Question

Solve the following :

A person holding a life policy of ₹1,20,000 for a term of 25 years wants to discontinue after paying premium for 8 years at the rate of ₹58 per thousand p. a. Find the amount of paid up value he will receive on the policy. Find the amount he will receive if the surrender value granted is 35% of the premiums paid, excluding the first year’s premium.

Answer 1

Given, Policy value = ₹1,20,000
Period of policy = 25 years
∴ Paid up value of one year = ${\displaystyle \frac{\text{Policy value}}{\text{Period of policy}}}$

= ${\displaystyle \frac{1,20,000}{25}}$
= ₹4,800
But, the person wishes to discontinue after paying premium for 8 years
∴ Paid up value = 4,800 x 8 = ₹38,400
Amount of premium paid for one year

= ${\displaystyle \frac{58}{1000}\times 1,20,000}$ = ₹6,960
∴ Amount of premium paid for 8 years
= 6,960 x 8
= ₹55,680
Surrender value
= 35% of (premium paid for 8 years – premium paid for first year)

= ${\displaystyle \frac{35}{100}\times (55,680-6,960)}$

= ${\displaystyle \frac{35}{100}\times 48,720}$
= ₹17,052
∴ The person holding life policy will get amount of ₹17,052.