Cash Surrender Value: What It is and When to Access It

Cash Surrender Value (CSV) is the amount of money a life insurance company pays out to a policy or annuity holder should they decide to end their plan. This cash is accumulated over time and can be accessed at any point, the longer a policy has been in place, the greater the cash surrender value will be.

Not all life insurance policies offer cash value accounts, but some, such as whole and universal life policies, do. This money is reinvested and earns interest, with prospective and existing policyholders able to access it in a variety of different ways.

This equity primarily accumulates resulting from premiums being paid by the policyholder. It is also possible for policyholders to invest extra funds into their policy, increasing the amount of equity held within the policy. The resulting cash surrender value will increase the more equity is held within the policy and the longer the policy has been active.

Cash surrender value serves multiple purposes and can be accessed in various ways, depending on the policy. It can be applied to replenish the policy's death benefit, to decrease premiums, or to purchase additional insurance coverage. It is also used as a part of the policy’s lapse protection, meaning policyholders may find that they are able to cash out their policy at a higher amount than they would otherwise have been able to.

At times, policyholders may have the option to take out a policy loan. In this instance, the policyholder can access the cash surrender value of their policy, and the amount taken may be subtracted from the death benefit upon death. It is important to remember that when lessons are taken, interest must be paid, again depleting the death benefit amount.

In certain circumstances, it may be possible for policyholders to surrender the policy for cash. The amount received will be equal to the cash surrender value of the policy, possibly with extra bonuses given if the policy has been in place for a predetermined amount of time.

Whether trying to make extra money, increase coverage, or best know how to handle the pay-out upon their death, policyholders should ensure they research whether their policy offers cash surrender value and the options available to access that equity should they decide to do so.