Full surrender, maturity, death or whole assignment: total benefit value: value of the policy or contract
The value of the policy or contract to be brought in under total benefits depends onthe nature of the chargeable event, and is explained at IPTM3515.There is further detail for insurers in this section and at IPTM7525.
Full surrender and maturity
Total benefit value for a full surrender or maturity includes any sum payablebecause of the event. The meaning of this is wide ranging and encompasses anypayment of sum or benefit by reason of the surrender or maturity, whether or not under theterms of the policy or contract and whether or not paid at the time of the event.
Where a policy is brought to an end as a result of a fundamental reconstruction of thepolicy, this is a surrender of the policy and the bringing into existence of a new policy- see IPTM7335. Sums are treated as paid from the old policyand applied as premium to the new policy. The amount of the sums treated as paid from thepolicy will depend on the particular transactions, but often it will simply be thesurrender value of the policy. It need not be the case that the amount treated as premiumto the new policy will be the same as the value of the old policy, for instance a fee mayhave been deducted as part of the transactions.
For a life insurance policy, where the chargeable event is the deathof an individual covered under the policy, the value of the policy must be taken to be thesurrender value of the policy immediately before the death not the amount of the proceeds.This is the amount of surrender proceeds that the insurer would, as a matter of fact, havebeen prepared to pay to the policyholder if the policy had been surrendered immediatelybefore the death.
Whether there is in reality a surrender value does not necessarily depend on the terms ofthe policy. If the insurer is prepared to pay a sum on surrender, notwithstanding that thepolicy terms might be silent on the matter or even say that there is no surrender value,then the policy does have a surrender value. It has to be a fact that no otherpolicyholder with a policy with similar terms would have been able to receive benefits onsurrendering the policy before the insurer can act on the basis that the policy had nosurrender value immediately before death.
Where a life annuity contract provides for the payment of a capital sumon death, the actual sum payable must be taken as the value of the contract in the gaincalculation, not the surrender value immediately before death.
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