Question

At the time of retirement of a partner, firm gets _________ from the insurance against the Joint Life Policy taken jointly for all the partners.

• A. policy amount
• B. surrender value
• C. policy value for the retiring partner and surrender value for the rest
• D. surrender value for all the partners

Answer 1

The correct option is B surrender value

A partnership firm may decide to take a joint life insurance on the lives of all the partners. The firm pays the premium to the insurance company, which in turn payable to the firm on the death or maturity of the policy holder, whichever is earlier in case of retirement. Hence, the firm is liable to receive the surrender value in case of retirement. The objective is to minimize financial hardship using the payment of a large sum of capital on the death or retirement of partner.

Surrender value - It refers to the sum of money an insurance company will pay to the policy holder or annuity holder in the events his or her policy is voluntarily terminated before its maturity or the insured event occurs.