cash surrender value


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Cash Value

The amount of cash that becomes available to an insured person upon the cancellation of his/her insurance policy. Most often, this applies to the savings portion of a canceled whole life policy. This value is considered an asset and can be borrowed against or used as collateral. It may also be called a cash surrender value or a surrender value.

cash surrender value

The money paid by an insurance company to a policyholder who is canceling an annuity or cash-value life insurance policy. Cash value accumulates when premiums and interest on any previous cash value exceed the cost of insurance. Generally, the cash value a policyholder receives upon cancellation is not taxable unless it exceeds the sum of the premiums paid. Also called surrender value.

Cash surrender value.

The cash surrender value of a permanent life insurance policy is the amount you receive if you cancel or surrender your policy before you die.

It's a portion of the money that accumulates tax-deferred in your cash value account during the period you pay premiums on the policy, minus fees and expenses.

Generally the only portion of the cash surrender value that's subject to income tax is the amount that exceeds what you paid in premiums during the time the policy was in force, though you should check with your tax adviser.

References in periodicals archive ?
What are the income tax consequences when the owner of a life insurance or endowment contract takes the lifetime maturity proceeds or cash surrender value in a one sum cash payment?
With a 34% marginal tax rate, he would have to pay $680,000 of taxes--the tax bill on surrender of the policy would consume the entire cash surrender value he received, and he would have to pay an additional $180,000 of tax out of pocket.
If the cash surrender value is invested conservatively, some if not most of the money will be in very short-term bonds.
The exemption protects the cash surrender value of a life insurance policy.
The amount of the loan should be shown to reduce the cash surrender value, with disclosure of the amount so offset.
For now, "Fair Market Value shall be cash surrender value (without reduction for surrender charges) provided that the cash value is at least as large as the aggregate of (1) the premiums paid from the date of issue through the date of distribution, plus (2) any amounts credited (or otherwise made available) to the policyholder with respect to those premiums, including interest, dividends and similar income items, minus (3) reasonable mortality charges and other charges (other than mortality charges), but only if those charges are actually charged on or before the date of distribution.
Taking into account both initial expenses and taxes, Albizzati and Geman (1994) compare, at any given future date, the (deterministic) final value of the contract with the final value of a new one, having the same maturity and acquired by reinvesting the (guaranteed) cash surrender value at the prevailing market conditions.
That is, the premium funds both the insurance and an increase in the policy's cash surrender value.
The paid-up additions carry a much lower commission and, therefore, leave the policy's cash surrender value much higher in the early years.
If the policy is surrendered for its cash value, however, any excess of cash surrender value over the cumulative premiums paid wold be included in taxable income.
Life Settlement products can bring, on average, 2 to 5 times more than the cash surrender value insurance carriers are willing to provide.