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Closure versus surrender value

The story 

George, aged 80, had held life insurance and funeral benefit policies with a friendly society since 1973. The society told George that it intended to stop its life and funeral cover as from 1 April 2013. George said that during a phone conversation with the society in January 2013, he was told that his estate would receive $15,000 if he were to pass away before 31 March 2013, but would only receive $8,000 if he passed away after 31 March 2013. George thought that this was unfair and referred his complaint to FSCL. 

The society confirmed to George that the closure value of his life insurance policies would not be as low as $8,000. The society said that there had been a misunderstanding, and the amount of $8,000 quoted was the surrender value of the policies. 

The society confirmed it would come back to George with the actual closure value of his policies after 31 May 2013. 

FSCL’s review 

It was not clear to FSCL what the difference was between the ‘closure value’ and ‘surrender value’. It did not seem logical that there should be a difference in the value of the policies if George passed away after 31 March 2013 than if he had passed away before 31 March 2013. 

However, without FSCL carrying out a full investigation of the complaint, the society confirmed in July 2013 that George would be receiving a payment of $16,600 which he was very happy with. 

In August 2013, George received $11,000 of this amount. The society said it would pay George the balance within 2 to 3 months.