What is the term for the cash value that a policyholder receives upon surrendering their policy?

The cash value that a policyholder receives upon surrendering their policy is referred to as the cash surrender value. This value represents the accumulated savings component within a permanent life insurance policy, minus any outstanding loans or penalties that may apply. When a policyholder decides to surrender the policy, they access this cash amount instead of continuing the insurance coverage.

The cash surrender value is important because it reflects the money the policyholder can expect to receive immediately from the insurance company, which they can use for various purposes, such as covering expenses or investing elsewhere. This value is typically available only in permanent life insurance policies, which build cash value over time, unlike term life insurance policies that offer no such value upon expiration or surrender.

Understanding this term is essential for policyholders, as it can impact financial planning decisions and the overall understanding of the benefits provided by different types of life insurance.