Life Insurance and Loan Value, Cash Value and Surrender Value

Life Insurance and Loan Value, Cash Value and Surrender Value

You may be aware that there are generally two broad types of life insurance; term life insurance and permanent, or whole life insurance. You may even know that permanent or whole life insurance usually builds some equity over time. This equity may be tapped into to help get you through a difficult time or to take advantage of an opportunity.

You may not, however, be aware of the meaning of the different phrases describing this value. Here is a look at the differences between “cash value, “surrender value” and, “loan value” of a permanent life insurance policy.

Cash Value

The cash value of a life insurance policy is the cash or account value that the policy has accumulated over time. The longer the policy has been in force and the larger the premiums, the larger the cash value is likely to be.

Loan Value

One of the benefits of a permanent life insurance policy beyond that it builds value, is that the value can be accessed through a low interest loan. This allows funds to be accessed by the policy owner while still maintaining some of the protections of the life insurance policy. Money that is loaned through the policy can be repaid to restore the full value of the policy or the loan amount will be deducted in the event of the death of the insured.

Surrender Value

A policy’s surrender value is the net value of a permanent life insurance policy once any loans and/or fees are deducted. If the cash value of a policy, for example, is $5,000 and loans, interest and fees against the policy total $1,000, the surrender value would be $4,000. It is important to remember that if a policy is “surrendered” for its value, it is no longer in force. Any death or other benefits associated with the policy are negated. Surrendering a policy for its value, in essence, cancels the policy.

If premium payments on a permanent or whole life insurance policy stop, the policy may still provide coverage through its build up of cash value. This cash value will frequently be used to extend the coverage unless a policy is surrendered for cash or if its value is absorbed through unpaid loan interests and fees.

If you have a life insurance policy and would like to know if it has value, you can request a policy status from the issuing company. This will provide general details about the policy. If you have other questions, please feel free to contact our independent agents.


Do you have questions about your insurance? Find an insurance agent near you with our Agent Finder

Buzz Your
Insurance Agent

Search for a local agent with our agent finder map.

Agent Finder

Search All Blogs

Search
Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt

Buzz Your
Insurance Agent

Search for a local agent with our agent finder map.

Agent Finder

Want to learn more about our blog writer?

Read more about KayLynn's background.

Click Here

Search All Blogs

Search
Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt

South America 101-: Interesting and Little Known Facts

Discover ore About This Large and Diverse Part of the World

Incredibly Successful Businesses Started by Women

Here Are Some $1 Billion Plus Companies Started by Women

The ABC’s of Policy Loans

Learn More About This Potentially Valuable Feature of Your Life Insurance Policy

Six Critical Fluids for Your Car

It Takes More Than Fuel to keep Your Car Running

Increasing the Odds of Getting Your Rent Deposit Back

Getting Your Full Rent Deposit Returned Doesn’t Have to be Impossible

Tips to Making the Most Out of Your Garage or Yard Sale

If You Are Going to Do the Work, Make the Most of It.

Commercial Building Fires: The Five Top Causes

Most Business Fires Are Preventable

Keeping Important Documents Safe

Keeping Critical Papers in Their Place

Automobile Racing in America: A ‘Checkered” Past

The Dangerous Sport Has Over a 100-Year History in the USA

Pool Safety Tips

How o Keep Your “Attractive Nuisance” Safer