Surrender Value

Surrender value — also called cash surrender value — is the net amount a policyholder receives upon voluntarily terminating a permanent life insurance policy before the insured's death or policy maturity. It equals the policy's gross cash value minus any outstanding policy loans and applicable surrender charges. Surrendering the policy permanently ends coverage and may generate a taxable event: if the surrender value exceeds the total premiums paid (cost basis), the gain is taxable as ordinary income. Before surrendering, policyholders should consider policy loans, reduced paid-up insurance, or a life settlement as potentially more advantageous alternatives.