It applies to the savings element of whole life insurance policies that are payable before death.
Posted: Thu Apr 28, 2011 03:26 am Post Subject:
Not a very good explanation.
Surrender value is the amount of money a policyowner will receive in the event they choose to cancel (terminate) an insurance policy that has a cash value element. This could be a whole life policy, a universal life policy, even a term life policy with a "return of premium" feature.
If a policy has developed cash value (usually not before the end of the third policy year in most contracts due to the expense of underwriting the coverage, administering the new policy, and paying commissions to the agent), the policy may be "surrendered" for that cash value. However, the insurance company will usually include a "surrender charge" which reduces the amount payable at that time (stated as a dollar amount, a percentage of something, or simply unstated or factored into the total cash value) as a penalty for cancelling what they thought was going to be a long term cash flow. If the surrender charge is high, a policyowner might choose not to surrender the policy at that time, and continue paying premiums instead.
Surrender charges can linger in a cash value insurance policy for as long as 10-15 years or more. In some policies they can be so large in the first several years that very little cash value will be taken in the event of such an early termination. It is important to understand and know what the surrender charges are in a policy before you apply for it or accept it after applying for it.
Posted: Fri Apr 29, 2011 09:27 pm Post Subject:
If you are talking about the surrender value of a life insurance policy it is the sum of money an insurance company will pay to the policy holder in the event their policy is voluntarily terminated before its maturity or the insured event occurs.
Posted: Wed Apr 27, 2011 05:43 pm Post Subject:
It applies to the savings element of whole life insurance policies that are payable before death.
Posted: Thu Apr 28, 2011 03:26 am Post Subject:
Not a very good explanation.
Surrender value is the amount of money a policyowner will receive in the event they choose to cancel (terminate) an insurance policy that has a cash value element. This could be a whole life policy, a universal life policy, even a term life policy with a "return of premium" feature.
If a policy has developed cash value (usually not before the end of the third policy year in most contracts due to the expense of underwriting the coverage, administering the new policy, and paying commissions to the agent), the policy may be "surrendered" for that cash value. However, the insurance company will usually include a "surrender charge" which reduces the amount payable at that time (stated as a dollar amount, a percentage of something, or simply unstated or factored into the total cash value) as a penalty for cancelling what they thought was going to be a long term cash flow. If the surrender charge is high, a policyowner might choose not to surrender the policy at that time, and continue paying premiums instead.
Surrender charges can linger in a cash value insurance policy for as long as 10-15 years or more. In some policies they can be so large in the first several years that very little cash value will be taken in the event of such an early termination. It is important to understand and know what the surrender charges are in a policy before you apply for it or accept it after applying for it.
Posted: Fri Apr 29, 2011 09:27 pm Post Subject:
If you are talking about the surrender value of a life insurance policy it is the sum of money an insurance company will pay to the policy holder in the event their policy is voluntarily terminated before its maturity or the insured event occurs.
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