The Differences Between Cash Value and Cash Surrender Value

Permanent life insurance policies, such as whole life or universal life, often include two important terms: cash value and cash surrender value.

What is Cash Value?

Cash value is the amount your policy builds over time through premiums and interest. A well-funded policy typically grows a higher value over time. This gives you more flexibility for loans, withdrawals, or future policy adjustments.

Cash value is the portion of your policy you can borrow against. You can also use it for other benefits while the policy remains active.

How Does Cash Value Differ From Cash Surrender Value?

Cash surrender value is the amount you get if you cancel the policy before you receive death benefits. This amount is usually the cash value minus any surrender charges, outstanding loans, and fees.

What are Surrender Charges?

Surrender charges are fees applied when you end your policy early, especially within the first several years. These charges help the insurer recover upfront costs and reduce the payout you receive. Over time, surrender charges often decrease and may eventually disappear.

Essentially:

• Cash value is the total savings your policy has accumulated.
• Cash surrender value is the amount you receive if you cancel the policy early.

Understanding these terms may assist in managing your policy effectively. This knowledge allows you to make informed decisions about borrowing, surrendering, and maintaining your coverage. Contact your Federated^® marketing representative today to start a conversation about policy management to help ensure your coverage aligns with your goals. 

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This article is for general information and risk prevention only and should not be considered an offer of insurance or legal, financial, tax, or other expert advice. The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all losses. The information herein may be subject to, and is not a substitute for, any laws or regulations that may apply. This information is current as of its publication date and is subject to change. Some of the services referenced herein are provided by third parties wholly independent of Federated. Federated provides access to these services with the understanding that neither Federated nor its employees provide legal or other expert advice. All products and services not available in all states. Qualified counsel should be sought with questions specific to your circumstances. All rights reserved.