Cash surrender value

What it means

Permanent policies — whole life, universal life — build a value that can be borrowed against or taken by surrendering the policy. Term insurance has none.

Surrendering ends the cover. Borrowing against the value keeps it, but unpaid loans and interest reduce what beneficiaries receive and can cause the policy to lapse.

There can be a taxable gain on surrender, and surrender charges in the early years.

Why it matters

It is an asset families often do not realize exists, and it can be the difference in paying for care.

It is also how a policy quietly ends: loans and unpaid premiums consume the value, the policy lapses, and nobody finds out until a claim is made.

When you are likely to meet it

• When looking at what a parent's policies are worth.
• When money is needed for care.
• When a policy is found and its status is unknown.

Related terms

• Accelerated death benefitA payment from a life insurance policy to the insured person while they are still alive, when they are terminally or chronically ill.
• Death Master FileA federal record of reported deaths, used by insurers and institutions to identify account holders who have died.
• Fair market valueWhat a willing buyer would pay a willing seller, neither under pressure and both knowing the facts.
• Funeral trustMoney set aside to pay for a funeral, held so it cannot be spent and often so it does not count for Medicaid.
• Group life insuranceLife insurance provided through an employer, union or association rather than bought individually.
• Lapsed policyA life insurance policy that has ended because premiums were not paid — sometimes without anybody realizing.
• Life policy locatorA free search service run by the insurance regulators, which asks participating insurers whether a person held a policy.

Sahvelo guidance that uses this

• Life insurance
• Finding life insurance