Does Life Insurance Have a Cash Surrender Value?

Your policy may have a cash surrender value – meaning, the policy itself is worth some money, and you could receive that cash once the policy is surrendered.

Sometimes, you just need cash. We get it — it happens to everyone. Life catches up with you — or maybe, for whatever reason, you’d like to invest your money with a different insurance company. In these cases, you can surrender your life insurance policy and claim a cash amount if you have a specific type of policy.

One tip.  Before you surrender your policy you should see if you can sell the policy for cash.

Cash surrender value definition

A cash surrender value is the amount of cash a policyholder would receive if they canceled their life insurance policy, minus any early surrender charges or penalties.

In the early days of a policy, the sum will be fairly insignificant in almost all cases — many times, there may be no value at all.


Does my life insurance policy have a cash surrender value?

This depends.  Term life policies offer no cash surrender value at all.  If you have a permanent policy such as whole life or universal life the policy could very well have cash value depending on how long the policy has been in force and how many premiums have been paid into the policy.


When should I surrender life insurance?

This is really up to you. One primary reason policyholders surrender is if the policy is no longer needed.

This commonly occurs when the beneficiary dies before the policyholder. Other family members may not need the coverage, so the policy can be canceled — at which point you might as well recover your money.

A health change is another typical reason — if a person stops smoking or loses a significant amount of weight, a new policy may be in order. There’s no set time, and most people end up doing this when there is a need for cash or surrender, or when switching a benefit.


Is there a fee?

Permanent life insurance policies will have a “surrender charge” fee between the first 7-10 years of the plan. The IRS views policy surrender as income, so know that a surrender amount may be taxed. Note that is best not to cancel a new policy with the expectation of cash surrender — you could often end up losing a substantial amount more money than you invested.

Questions about cash surrender value on your life insurance plan? We can help, especially if you’d like to view other plan options or change your benefits. Contact us today for one on one assistance.