Cash Value vs. Surrender Value: Which Is Better for You
Cash value vs. surrender value compares what your accumulated life insurance savings look like. Cash value is the sum of the investment return on the premiums you paid, but surrender value is money you get back when you cancel a policy.
Ready to compare quick life insurance quotes?
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Rachael Brennan
Licensed Insurance Agent
Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...
Licensed Insurance Agent
UPDATED: Jul 27, 2024
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Jul 27, 2024
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
A/B Active Test Data
Not visible on live sitesTest Name: ab_mda_colors_qq
Test Info: Starting when a user lands on one of our post, page or company pages, we either leave the MDAs as they are (control), or change them to the standard orange color (variant). This control/variant assignment will be passed along via experiment ID with any MDA submission after the user lands on a valid page.
Test Assignment: MDAColorsQQ:control
- Cash surrender value is the sum of money you receive from your life insurance company after you cancel the policy
- Cash value is the sum of money you accumulate on a policy by investing a portion of your monthly premiums
- You can borrow against the cash value of your permanent life insurance policy, but any loans you haven’t paid back are deducted from your death benefits
Some professionals will make cash value vs. surrender value sound like a difficult concept, but our article breaks it into an easy-to-read guide.
Cash value and surrender value are common among annuities and permanent life insurance policies. We’ll focus on the difference between these two life insurance terms and how both values affect your life insurance policy.
The Difference Between Cash Value vs. Surrender Value
If you have permanent life insurance, you’ll come to know the difference between cash value vs. cash surrender value. Although these terms sound the same, these two permanent life insurance factors are quite different:
- Cash value is the life insurance savings account associated with most whole life policies
- Surrender value is the value of the policy minus the insurance company’s cancellation fees
Cash value life insurance builds a savings account by investing a portion of your monthly premium. As you pay your monthly rates, a portion of your monthly payments goes toward the cash-value account, while the other part applies to your policy. Some accounts allow you to make investments, such as bond portfolios and other types of investments.
While cash value refers to the life insurance savings account associated with permanent policies, the surrender value is the amount of the policy itself minus cancellation fees. If you decide to cancel your whole life insurance, you won’t receive a refund for the whole value — you receive the policy’s surrender value.
According to the Internal Revenue Service (IRS), any money you receive from the surrender value of life insurance is taxable income.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Understanding Cash Value vs. Surrender Value
When evaluating life insurance, it’s crucial to understand the distinction between Cash Value vs. Fund Value and how they relate to other terms. Cash Value refers to the savings component in permanent life insurance policies, while Fund Value often pertains to investment-linked policies.
Policy Value vs. Surrender Value is another comparison to consider. The Surrender Value is the amount you receive if you cancel your policy, which is typically less than the Cash Value due to surrender fees.
Understanding Surrender Value vs. Cash Value helps clarify that the surrender value is derived from the cash value after fees are deducted.
A Life Insurance Policy Can Be Surrendered for Its Cash Value, but it’s important to note that Account Value in Insurance can be different from cash value depending on the policy.
Account Value vs. Cash Value and Account Value vs. Surrender Value highlight that while account value may represent the total value of the policy, cash value specifically refers to the amount available for withdrawal or loan.
Accounting for Cash Surrender Value in Life Insurance ensures that you accurately account for the funds you receive if you choose to surrender your policy. Understanding these terms will help you make informed decisions about your life insurance options.
How Cash Value Works in Life Insurance
Cash value is the sum of money you’ve built up while paying for life coverage. You cannot cash out term life insurance — only permanent policies have an investment component.
Suppose you buy a permanent life insurance policy, such as a whole life insurance policy, and you have a death benefit of $250,000. If you make $1,000 annual premium payments for 15 years, you will have a $15,000 cash value.
You can withdraw from the accumulated premiums‘ value, but your provider may charge a fee when you want to access funds. Each company that provides a permanent policy has a different percentage, so shop around until you can find a surrender charge that works for you.
Early withdrawals come with a penalty. However, penalties won’t affect your credit, and you aren’t required to pay back loans against life insurance. Loans are subtracted from the policy’s death benefit amount, so borrow wisely
Read more: Credit Life Insurance
An Example of Surrender Value in Life Insurance
If you decide to surrender your life insurance policy, research the surrender fee your insurance company charges. For example, if you see that a 30 percent surrender fee will affect your cash value when cancel the policy, then the surrender charge will deduct $4,500 from your $15,000 cash value. Therefore, your surrender value is $10,500.
If you have term life insurance, there is no surrender value, and you will not receive any refund for canceling a policy. Read more about how to cancel life insurance.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Cash Value vs. Surrender Value: Permanent and Term Life Insurance
Only whole life insurance has a cash and surrender value. Let’s examine more differences by looking at term vs. whole life insurance rates.
Age of Non-Smoker | Rates for 10-year Term | Rates for 20-year Term | Rates for 30-year Term |
---|---|---|---|
25 | $8.12 | $9.09 | $11.91 |
30 | $8.16 | $9.13 | $12.51 |
35 | $8.22 | $9.40 | $13.50 |
40 | $9.52 | $11.35 | $18.09 |
45 | $12.23 | $15.60 | $22.92 |
50 | $15.15 | $21.45 | $34.35 |
55 | $19.49 | $31.54 | N/A |
60 | $28.35 | $50.52 | N/A |
65 | $49.50 | N/A | N/A |
Some permanent insurance policies have complex concepts, such as universal life insurance and variable universal life insurance. Term life policy is much simpler and cheaper, but this type of life policy doesn’t have the savings benefit of a permanent policy.
Understanding Cash Surrender Value in Life Insurance and Annuities
When evaluating life insurance or annuities, understanding the cash surrender value is crucial. This topic explores the concept of cash surrender value, its application to various insurance policies and annuities, and how it compares to other aspects like death benefits.
What is Cash Surrender Value?
Definition and Meaning
The cash surrender value definition refers to the amount of money a policyholder receives when they cancel their insurance policy or annuity before its maturity. This value is distinct from the policy’s death benefit or investment returns and can be influenced by several factors.
- Cash Surrender Value Life Insurance Policy: The amount returned to the policyholder upon policy cancellation, excluding any fees or penalties.
- Cash Surrender Value Annuity: Similar to life insurance, but applies to annuities, reflecting the value of the annuity contract upon surrender.
How Cash Surrender Value Works
Examples and Applications
- Cash Surrender Value Example: For instance, if a life insurance policy has a cash surrender value of $10,000 and the surrender fee is $1,000, the policyholder would receive $9,000 upon cancellation.
Cash Surrender Value for Term Life Insurance
- Cash Surrender Value for Term Life Insurance: Term life insurance policies typically do not have a cash surrender value, as they do not build up any cash or investment component during the policy term.
Cash Surrender Value of Whole Life Insurance
- Cash Surrender Value Whole Life Insurance: Whole life insurance policies accumulate cash value over time. The cash surrender value represents this accumulated amount minus any applicable surrender charges.
Factors Affecting Cash Surrender Value
Current vs. Non-Current Cash Surrender Value
- Cash Surrender Value of Life Insurance Current or Non-Current: The value can be affected by whether the policy is current (paid up-to-date) or non-current (past due or lapsed).
Cash Surrender Value vs. Death Benefit
- Cash Surrender Value vs. Death Benefit: The cash surrender value is the amount returned if the policy is canceled, while the death benefit is the amount paid to beneficiaries upon the insured’s death. They serve different purposes and are calculated differently.
Comparing Cash Surrender Values
Cash Surrender Value of Annuity
- Cash Surrender Value of Annuity: Reflects the amount you receive when canceling an annuity contract. It can vary based on the type of annuity and the length of time it has been held.
Cash Surrender Value Term Life Insurance
- Cash Surrender Value Term Life Insurance: Typically, term life insurance does not offer a cash surrender value, as it does not accumulate cash value over the policy term.
Understanding Cash Surrender Value in Context
Cash Surrender Value Sunlife Meaning
- Cash Surrender Value Sunlife Meaning: Specific to Sun Life insurance policies, it represents the amount policyholders receive if they surrender their policy, according to the terms set by Sun Life.
Summary
The cash surrender option provides flexibility to policyholders, allowing them to cancel their policies or annuities and receive a portion of the invested funds. However, it is important to understand the implications and differences in values between various types of insurance and annuity products.
Understanding Accumulation Value vs. Surrender Value in Life Insurance
When evaluating your life insurance policy, it’s important to understand the difference between Accumulated Value in Life Insurance and Surrender Value. Accumulated Value vs. Surrender Value refers to the comparison between the total amount you’ve built up in your policy (Accumulated Value) and what you receive if you decide to cancel the policy (Surrender Value).
The Accumulation Approach to Surrender Value involves considering how the accumulated value affects the surrender value of the policy. Accumulation Value in Life Insurance represents the sum of all premiums paid and the interest earned over time, whereas the Surrender Value of Life Insurance is the amount you get back after deducting any penalties or fees when canceling the policy.
In contrast to Cash Surrender Value, which is the value you receive upon surrendering the policy, Accumulation Value vs. Cash Surrender Value highlights the differences between what you’ve accumulated versus what you might get back. Similarly, Accumulation Value vs. Cash Value differentiates between the amount you’ve saved up in your policy and the current cash value available for loans or withdrawals.
Understanding these values can help you make informed decisions about your policy, ensuring you’re aware of both your Accumulation Value of Life Insurance and the implications of surrendering your policy.
Key Differences in Life Insurance Policy Terms: Cancellation, Surrender, and Values Explained
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Understanding Key Life Insurance Terms: Cancellation, Surrender, and Values
When evaluating life insurance policies, it’s crucial to understand the differences between various terms related to policy value and benefits. Here’s a breakdown:
- Difference Between Cancellation and Surrender of an Insurance Policy: Cancellation generally refers to stopping an insurance policy before its term ends, often with a refund of unused premiums. Surrender involves terminating a policy to receive its cash surrender value, which may be less than the total premiums paid due to surrender charges.
- Difference Between Cash Value and Death Benefit: Cash value is the amount accumulated in a permanent life insurance policy that can be borrowed against or withdrawn. The death benefit is the sum paid out to beneficiaries upon the insured’s death, which typically exceeds the cash value.
- Difference Between Cash Value and Fund Value: Cash value is specific to permanent life insurance policies and represents the amount accumulated within the policy. Fund value, often associated with investment-linked policies, refers to the value of investments within the policy.
- Difference Between Cash Value and Surrender Value: Cash value is the amount accumulated over time in a life insurance policy, while surrender value is the amount paid out when a policy is canceled, after deducting any surrender charges.
- Difference Between Fund Value and Surrender Value: Fund value is the value of investments within a policy, while surrender value is the amount received when a policy is surrendered, which may be less than the fund value due to applicable charges.
- Difference Between Paid-Up Value and Surrender Value: Paid-up value refers to the value of a life insurance policy when it is fully paid up and no further premiums are required. Surrender value is the amount received upon canceling a policy, which may be less than the paid-up value due to surrender charges.
- Difference Between Surrender Value and Paid-Up Value: Surrender value is the amount paid when a policy is surrendered early, while paid-up value is the value of the policy once it is fully paid up and no more premiums are required, typically higher than the surrender value.
Understanding these distinctions helps in making informed decisions about your life insurance policy and its benefits.
Case Studies: Cash Value vs. Surrender Value
Case Study 1: John’s Whole Life Insurance Policy
John purchased a whole life insurance policy with a death benefit of $250,000. Over 15 years, he made annual premium payments of $1,000. At the end of this period, the cash value of his policy reached $15,000.
John had the option to withdraw from this accumulated cash value; however, his insurance provider would charge a fee for accessing the funds.
John decided to cancel his policy and discovered that there was a 30 percent surrender fee. As a result, $4,500 was deducted from his $15,000 cash value, leaving him with a surrender value of $10,500.
Case Study 2: Sarah’s Term Life Insurance Policy
Sarah had a term life insurance policy, which does not accumulate cash value. She decided to cancel her policy, but since there was no surrender value associated with term life insurance, she did not receive any refund for canceling the policy.
Case Study 3: Michael’s Universal Life Insurance Policy
Michael opted for a universal life insurance policy, which offered both cash value and surrender value. Over time, he accumulated a substantial cash value within his policy. He utilized the cash value as an investment opportunity, allowing him to grow his savings.
Michael valued the flexibility and potential growth of the cash value component in his policy, even though it came with higher premiums compared to term life insurance.
Case Study 4: Emily’s Comparison of Permanent and Term Life Insurance
Emily compared cash value and surrender value in both permanent and term life insurance policies. She discovered that only permanent policies, such as whole life insurance, had cash and surrender values.
On the other hand, term life insurance did not offer these features. Emily found that permanent policies provided investment opportunities and savings benefits, while term policies were simpler and more affordable.
Cash Value vs. Surrender Value: What is the bottom line?
A cash value can be useful, especially for policy owners who have had their life insurance policy. To access more saving and investment opportunities with cash value life insurance, buy permanent policies like universal or variable whole life insurance. These policies are more expensive but come with more investment opportunities.
If you need cheap life insurance plans, you may want to explore term life insurance quotes. Use our life insurance comparison tool above to compare different policies and cash value options from life insurance companies in your area.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Frequently Asked Questions
What’s the difference between cash value and surrender value?
Cash value is the total value of the policy, while surrender value is what you get when you cancel the policy after deducting any fees.
How does cash value work in life insurance?
Cash value grows over time as you pay premiums. It’s like a savings account within your policy.
Can I borrow money against my life insurance?
Yes, with permanent life insurance, you can borrow against the policy’s cash value.
Can I cash out term life insurance?
No, term life insurance doesn’t have a cash value that can be cashed out.
How do I calculate the surrender value of my life insurance policy?
Add up to the total amount of premiums you’ve paid for the life of the policy, then subtract the surrender fees your insurer charges to get the surrender value.
Does term life have a cash surrender value?
No, term life insurance does not have a cash surrender value. Term life insurance provides coverage for a specified term and does not accumulate cash value.
Does term life insurance have a cash surrender value?
No, term life insurance does not offer a cash surrender value. This type of policy only provides a death benefit if the insured dies during the term of the policy.
How is cash surrender value of life insurance calculated?
The cash surrender value is calculated by taking the total cash value of the policy and subtracting any applicable surrender fees. This value represents the amount you will receive if you cancel the policy.
How much will I receive if I surrender my life insurance policy?
The amount you receive depends on the cash value accumulated in the policy minus any surrender fees. To find out the exact amount, you should check with your insurance provider for the current surrender value of your policy.
How to calculate cash surrender value of life insurance?
To calculate the cash surrender value, add up the total cash value of the policy and subtract any surrender charges. This can be obtained from your insurance provider or by reviewing your policy documents.
What happens when a policy is surrendered for cash value?
When a policy is surrendered for cash value, the policy is canceled, and you receive the cash surrender value, which is the cash value minus any surrender fees. This action ends the coverage under the policy.
What is a cash surrender value in life insurance?
A cash surrender value in life insurance is the amount of money you receive if you cancel a permanent life insurance policy. It is calculated by subtracting any surrender fees from the accumulated cash value.
What is a cash surrender value on life insurance?
The cash surrender value on life insurance refers to the amount payable to the policyholder upon canceling a permanent life insurance policy, after deducting any applicable fees.
What is a surrender value in insurance?
A surrender value in insurance is the amount an insurance policyholder receives upon canceling their policy before its maturity or before the insured event occurs. It is generally less than the total cash value due to surrender charges.
What is accumulation value in life insurance?
Accumulation value is the total amount of money that has accumulated in a life insurance policy’s cash value account. It includes the premiums paid, any interest or investment returns, and adjustments for policy loans and withdrawals.
What is fund value in life insurance?
Fund value in life insurance refers to the amount of money in the investment account of a permanent life insurance policy. This value can fluctuate based on the performance of the investments selected within the policy.
What is net accumulated value in life insurance?
Net accumulated value is the total amount accumulated in a life insurance policy’s cash value account, minus any outstanding policy loans and charges. It represents the amount available for withdrawal or surrender.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Rachael Brennan
Licensed Insurance Agent
Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.