Legal Definitions - Surrender value

Surrender value refers to the amount of money a person would receive if they withdraw money from their own life insurance policy’s cash value.

For example, if someone has a permanent life insurance policy or an annuity, the policy has an investment portfolio part that builds interest over time. The policy owner can withdraw funds from or take a loan against the policy. The amount a policyholder can withdraw from their life insurance policy at any time is called the surrender value.

It is important to note that surrender value is not the same as cash value. The cash value is the amount the policy is worth as it builds over time. When someone withdraws funds from the policy, it often incurs steep fees for early withdrawal, and the surrender value is the amount after the fees have been deducted.

After a period of time set in the policy, the policyholder usually can withdraw the cash value without any fees, in which case the cash value and surrender value would be the same.

For instance, if someone has a life insurance policy with a cash value of $10,000 and they want to withdraw some money from it, they may only receive a surrender value of $8,000 after fees.

In summary, surrender value is the amount of money a policyholder can receive if they withdraw funds from their life insurance policy’s cash value after fees have been deducted.