HMRC internal manual

Inheritance Tax Manual

Life Policies: definitions: 'surrender value' and 'open market value'

The surrender value of a policy is the amount the insurance company is prepared to pay at a particular point in time if the policyholder wishes to cancel the policy.

A Temporary or Term Assurance policy (IHTM20102) will never have a surrender value, although it may have a market value.

Life policies are often sold at prices in excess of their surrender values. So the surrender value is not necessarily the open market value of the policy, required under IHTA84/S160.

See also IHTM20211 and the definition of ‘claim value’ at IHTM20084.

The Actuarial Team is responsible for the valuation of life policies on an open market basis.