What is the Cash Surrender Value of Life Insurance?
The cash surrender value of a life insurance policy is the money returned to you if you voluntarily terminate your plan before death. The cash surrender value depends on the age of your policy, and some life insurance companies will charge fees upon surrender of cash. Depending on if you qualify for a life settlement, the cash value of your life insurance may vary. At Life Insurance Settlements, we can help find the best value for your life settlement.
How Much is My Cash Surrender Value of Life Insurance? It depends on many factors:
- The age of your plan will determine how much you get back if you cancel it. The earlier you terminate your contract, the less money you get back, and the more likely it is you' ll get charged fees for early withdrawal.
- It also depends on how large your policy is and how much you’ve paid toward it. Even if your policy is aged, your cash surrender value may not be the full amount. For example, if you purchased a $1 million life insurance policy forty years ago, you haven’t paid $1 million in premiums yet so you may get out what you paid in, but it will not be equal to the death benefit of the policy.
The Differences Between Cash Surrender Value vs. Cash Value
The cash value of your life insurance policy is the sum of money in your account. Some of the money you pay goes toward your account, while the rest is invested on your behalf. The cash value is the amount of funds held in your account at any given time.
The cash surrender value of your policy is the amount of money you receive if you terminate your policy early and depends on the factors listed above. If you terminate your life insurance policy, you may not receive the cash value.
How to Calculate Cash Surrender Value of Life Insurance
The cash surrender value of life insurance builds over time. The older your policy and the more money you’ve paid toward premiums, the more opportunities your money has to increase, especially if there’s an investment portion along with the life insurance.
Most life insurance policies also have a surrender period, which is the amount of time you must wait before your policy has any cash surrender value. If you want to find out the exact cash surrender value of your life insurance policy, it’s essential to contact your insurance company.
Your cash surrender value depends on how old your policy is and how much you’ve paid. It also depends on the market performance of the investment portion and how much of your payments the company invests for you. You also must factor in surrender fees.
Cash Surrender Value vs. Death Benefit
The death benefit of your life insurance policy is the amount of money your beneficiary receives upon your death. Your recipient will receive the entire death benefit in a lump sum that is not subject to taxes if you pass away.
The death benefit differs from the cash surrender value because it’s always the amount payable upon death, no matter how much you have paid thus far.
Life insurance policies are a great way to invest in your retirement and taking care of your loved ones.