Life Insurance Surrender Value
The decision to surrender your whole of life insurance policy is not one to be taken lightly.
There are a number of important factors to consider and you need the right advice before you make that decision.
The good news is that the specialist life insurance advisors we work with are experts in this area and can give you the right advice.
We’ll cover as much as we can, including:
What does surrendering a life insurance policy mean?
Put simply, you are cancelling your life insurance policy with your provider. You can do this at any time and you’ll receive all of the value of the policy, although there may be some administration charges applied which could reduce the amount you receive.
You also need to be aware that there is a difference between the surrender value and cash value, so please read on.
What does surrender value mean?
Surrender value and cash value can be easily confused. To put it as simply as we can, the surrender value is the actual amount of money you will get if you decide to access the money in your policy.
There is often an administration fee or penalty that is applied which can affect how much you will be paid.
What is the cash value?
The cash value is the amount of money that is in your account at any given time.
Your provider uses a portion of your money to make investments on your behalf and then, depending on how well these investments perform, credits your policy accordingly.
Cash surrender vs value surrender
As an example, suppose you take out a whole of life insurance policy with your provider with a payout of £200,000 upon your death.
After paying your premiums for 10 years, you find there is £10,000 cash value on your policy.
Almost all policies have a surrender charge, which can be as high as 35% or more, depending on the elapsed period of time since the policy was taken out.
So, although your cash value is £10,000, the provider could charge you a 35% early withdrawal fee of £3,500, leaving you with a surrender value of £6,500.
Remember that after your policy has been active for a certain period of time, the early surrender fees may no longer apply, so your cash value and surrender value will be the same.
Also bear in mind that if you surrender your life insurance policy, and then want to take out another policy at a later date, your increased age may be taken into account and this may be reflected in higher premiums or even difficulty in getting life insurance at all.
The above figures are for demonstrative purposes only, so you should always consult your provider or talk to an expert for the most up-to-date figures and the right advice.
Why surrender the value of your life insurance?
There are many reasons why you may want to surrender your whole life insurance, including:
- Unexpected bills
- House repairs
- To cover medical expenses
While it may help your finances in the short term, this is a decision that needs the right advice. You’ll need to balance your immediate needs, with your future requirements.
Call 0808 189 0463 or make a quick online enquiry. We’ll match you with one of the experienced life insurance brokers we work with.
They’ll be happy to answer your questions and advise you on all aspects of surrendering your life insurance policy.
Should I use a cash surrender value calculator?
Because everyone is different, with different terms and conditions on their life insurance policies, online calculator tools can only give you a rough idea.
Consult your provider, or have a chat with one of the expert life insurance advisors we work with.
They can provide you with bespoke calculations. What’s more, their advice is free and there’s no obligation to act on it.
Where to get the best advice
Before you go ahead with the decision to surrender your whole life insurance, you should get some advice on other options open to you.
If the reason you’re contemplating surrendering your life insurance is to raise cash for an unexpected expense, you might like to consider…
We work with expert advisors who can give you the right advice on both of these options.
Otherwise, you can arrange a free, no obligation chat with one of the expert life insurance advisors we work with.
Call us today on 0808 189 0463, we’d love to be able to help and it won’t cost you a penny.