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Cash Surrender Value

When you cancel a life insurance policy, such as a whole life policy, you are entitled to the cash value of your policy. Also referred to as the cash surrender value, this is the accumulated cash value that has built up over the years.

Any life insurance policy that has a built in savings component, like whole life or universal policies, has money that has been invested by either yourself or by the insurance company on your behalf. Over the year of paying into your plan, this invested money also grows due to the returns on these investments. If an individual decides they would like to cancel their life insurance policy, the cash surrender value is the amount that would be available before the policy becomes payable. Normally, a policy becomes payable upon maturity or death, but because life circumstances do change people may elect to cancel their policy instead.

Cash Surrender Value vs. Face Value

It is important to remember that the cash value in an insurance policy is not the same as the face value as the two are sometimes confused. A face value is the amount that will be paid to the beneficiaries if the terms of the policy are met and will be substantially larger.

Why Cancel Your Policy?

So why would someone choose to opt out of their life insurance policy? Many people have life insurance to guarantee that if they were to die, those who rely on them would not suffer a drop in their quality of life or be burdened by large debts.

If, for example, the original intention of taking out an insurance policy was to provide coverage for those child rearing years, once those children become financially independent, the insurance is no longer needed. The cash surrender value can be an attractive alternative to the insurance policy as the money can be used for other higher returning investments, or simply enjoyment.

The cash surrender policy can also serve an important role in other financial transactions. As an example, for those without alternatives, the cash surrender value can be used as collateral for a loan meaning you can borrow against it in the form of a policy loan.

To find more information about cash surrender value, it is recommended that you speak with a certified professional.

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