What is "cash surrender value" in life insurance policies?

Cash surrender value refers to the amount of money a policyholder can receive if they decide to cancel their life insurance policy before its maturity or before the insured event occurs. This value is significant because it represents a portion of the premiums paid that accumulates over time, particularly in permanent life insurance policies, such as whole life or universal life insurance.

Upon cancellation of the policy, the insurer will pay out this cash surrender value to the policyholder, which can be used for various purposes. It's important to distinguish this from the death benefit; the cash surrender value is available while the policy is still active and can be accessed by the policyholder, whereas the death benefit is payable only upon the death of the insured.

Understanding cash surrender value is crucial because it provides policyholders with the option to withdraw or surrender their policy for cash, rather than maintaining the coverage for the full term, especially if their financial needs or circumstances change.