Surrender Value of Life Insurance Policy - How Is It Calculated?

Learn what the surrender value of your life insurance policy is and how it is calculated. Find out if you should surrender your life insurance policy and cash out on the value it offers.

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Surrender Value of Life Insurance Policy - How Is It Calculated?

Surrendering your life insurance policy means that you are canceling your policy and asking for the life insurance company to provide you with the cash value of that policy that’s grown over the years. Many people decide that they need to stop paying into their whole life insurance policy and want to access the cash value it has, but there are limits to this. It is important to understand how the cash value of your whole life insurance policy is calculated to start with.

What Is the Life Insurance Surrender Value on Your Policy?

The cash value of any life insurance policy can change often. Many factors will play a role in determining what the cash value is at any given time. The type of policy you have as well as the current market conditions can impact the value. Most life insurance policies do not offer guaranteed growth. That is, you cannot expect the policy to reach a certain level in a specific amount of time. Rather, it is based on how well the investments within that policy are working.


When you take the surrender value of your life insurance policy, you are asking for the insurance company to provide you with the cash value. They will deduct any fees associated with the process. They will also pay out only the portion that is the cash value – not the death payment component.

Should You Cash Out Your Life Insurance – Whole Life Insurance Questions to Ask

When it comes to life insurance cashing out or obtaining the surrender value, remember that this can create a limitation for you. Once you do this, you cannot put that policy back into place, which means the death benefit is gone to your family. The death benefit does not remain in place. Second, many life insurance companies will provide you with the ability to borrow from the cash value. This means you can withdraw a sum of funds from the policy and then repay that over time. If you are not approaching retirement age just yet, this is one way to avoid surrendering your policy but getting some cash in hand for your needs.

How is the Life Insurance Policy’s Value Determined?

To determine the value of the life insurance policy, the company needs to factor in a variety of things. The type of policy you have, such as variable life or universal life insurance, is important. There tend to be fees involved in the process. The value is generally going to be larger the longer you hold the policy. If you just purchased it a few years ago, it may not be worth anything right now. However, if you have had the policy for years, it may have a significant value in place.

How to Get Whole Life Insurance Quotes for the Surrender Value

To know what the value is, call your life insurance agent. The whole life insurance quotes they give you will provide you with the specific value of your policy for today. But, remember, this can change over time. If you hold onto your policy for another few months, the value could be higher or lower, depending on the type of policy you have as well as the changes in the investments within it. Your agent can always give you an accurate value at any given time, though.

Why You Should Keep Your Policy Active Instead

While it is an option to cash out the value of your policy, it may be best to work with whole life insurance companies and maintain the policy longer. The longer it is there, the more value it builds. If you are surrendering your policy during your retirement years, that may be different as it may allow you to gain the funds you need. Yet, in this case, you can stagger with the withdrawals to help you keep as much as possible in place and earning value for you over the lifetime of the policy. Work with your financial advisor to determine if surrendering your life insurance policy is the best decision for your specific situation or if you should maintain it.