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Whole Life Insurance Surrender

Life Insurance

Whole life insurance differs from term life insurance in that it accrues interest, and you can access that interest with whole life insurance surrender values. Surrender values are also commonly called "cash value" or "policyholder's equity." Whole life insurance builds interest on the premiums you pay each year. As they build up, they are available for loans, but in some cases, you may want to surrender the policy to access this interest. Here are a few things to remember about whole insurance surrender values.

Surrendering Your Insurance Policy

If you need access to quick cash, and you have a mature whole life insurance policy, you can often turn in the policy to your insurance company and gain the cash value of the policy. The cash value is the interest that your policy has earned throughout its life. If the policy isn't very old, you may not have much interest built up, and this won't be an option. However, if the policy is mature, you may have quite a bit of interest you can take out of the policy. If you decide you don't need life insurance because you have adequate pensions and investments, surrendering the policy is a good way to get a refund of the premiums you've paid.

When Not to Surrender Your Policy

If you have no other form of life insurance, and still need it in the future, a whole life insurance surrender may not be your best option. When you try to obtain insurance in the future, your premiums will usually be higher, and it may be harder to get an insurance company to insure you. It's not a good idea to surrender the policy just to get cash. Instead, try taking a loan on the policy, or accessing some of the interest. Most whole life policies allow you to use this money as a loan, with some interest fees.

Some things to remember about the cash from a life insurance surrender include that you'll pay fees for surrendering the policy, and the money is taxable, too. If you allow the policy to continue, the money paid to your beneficiaries is non-taxable, so that's something to think about before you decide to surrender your policy.

Whole life insurance surrender can be a drastic action, but it can be a life saver, too. Whole life insurance is the only type of insurance you can surrender, because term life insurance doesn't accrue interest, so there's no cash value to access before the policy expires.

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