Surrender Value
The cash amount a policyholder receives upon canceling a permanent life insurance policy before its maturity date.
What is Surrender Value?
Surrender value, also called cash surrender value (CSV), is the amount of money an insurer pays to a policyholder who voluntarily terminates a permanent life insurance policy — such as whole life or universal life — before it matures or the insured dies. The surrender value equals the accumulated cash value of the policy minus any outstanding policy loans and surrender charges. Surrender charges are fees imposed by insurers during the early years of a policy (often the first 10–15 years) to recoup front-loaded sales and administrative costs. Surrendering a policy terminates all coverage; partial surrenders (withdrawals) may be available as an alternative that preserves some death benefit.
Example
A policyholder has held a whole life insurance policy for 12 years. The policy has accumulated $48,000 in cash value. The insurer imposes a 4% surrender charge in year 12, so the net surrender value is $48,000 × (1 − 0.04) = $46,080. The policyholder receives $46,080 in cash, but the $500,000 death benefit is permanently forfeited and any policy loans must be repaid from the proceeds.
Source: National Association of Insurance Commissioners — Life Insurance