What Is Cash Surrender Value? Definition

Why it matters

The figure is usually lower than the full cash value in the early years because of surrender charges. If you end the policy, the coverage stops and you may owe income tax on gains above what you paid in premiums. Before you surrender, ask about other options such as reduced paid-up coverage or a policy loan. Your policy lists a table of values by year.

Source: law.cornell.edu

Related terms

Cash Value: Cash value is the savings part of a permanent life insurance policy. It grows over time at a rate set by the policy and can be borrowed against or withdrawn, subject to the contract terms.
Surrender Charge: A surrender charge is a fee an insurer charges if you withdraw more than the allowed amount from an annuity, or cancel the contract, during the surrender period. It is usually a percentage that declines each year.
Policy Loan: A policy loan is money you borrow from the carrier using your policy's cash value as collateral. The policy stays in force if you keep paying interest and the loan stays below the cash value.
Nonforfeiture Options: Nonforfeiture options are choices a permanent policy owner has if premiums stop. They let the owner keep some value, such as cash, reduced paid-up coverage, or extended term coverage.
Reduced Paid-Up: Reduced paid-up is a nonforfeiture option that uses a policy's cash value to buy a smaller, fully paid permanent policy. No more premiums are due.

All 241 terms

Why it matters

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