Glossary

Cash surrender value

What a permanent policy pays the owner on cancellation: the accumulated savings minus surrender charges and any outstanding loans.

Also called: surrender value, net cash value, CSV

Cash surrender value is the money you actually receive if you give up a permanent life insurance policy before the insured dies. It starts with the policy's cash value, subtracts any surrender charge still in effect and any unpaid policy loans and interest, and may add unused premium or dividends owed.

Formula: cash surrender value = cash value − surrender charge − loan balance and accrued interest. Hypothetical example: a universal life policy in year six shows $40,000 of account value, a $6,000 surrender charge and a $10,000 loan. Surrendering would pay about $24,000. In whole life, guaranteed cash surrender values appear in a table printed in the policy.

The surrender value is taxable to the extent it exceeds your cost basis, generally the premiums paid minus tax-free amounts received, and a loan wiped out at surrender counts toward that gain. Surrendering also ends the death benefit. Before giving up a policy, compare the alternatives: a 1035 exchange, the nonforfeiture options of reduced paid-up or extended term insurance, a policy loan or a life settlement. See surrendering a life insurance policy: what you get and what it costs and the keep, surrender or sell your policy?.

Last reviewed October 4, 2026

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Related terms

Cash value The savings component that builds inside whole life, universal life and other permanent policies, which the owner can borrow against or withdraw. Surrender charge A fee deducted from a policy's or annuity's value if you cancel or withdraw too much in its early years, usually shrinking each year. Policy loan Money borrowed from an insurer using a permanent policy's cash value as collateral, with no credit check and no required repayment schedule. Reduced paid-up insurance A nonforfeiture option that uses a policy's cash value to buy a smaller, fully paid permanent policy so no more premiums are due. Extended term insurance A nonforfeiture option that uses a lapsed policy's cash surrender value to buy term coverage for the full face amount for as long as the money lasts. Cost basis For life insurance and annuities, the after-tax money put in (premiums minus tax-free amounts taken out), which sets how much of a payout is taxed.

Related guides

1035 exchanges: swapping policies without tax Section 1035 lets you swap a life policy for another policy or an annuity without taxing the gain. What qualifies, what you can lose and how to do one right. Community property states and life insurance How community property law in nine states can give a spouse a claim to life insurance bought with marital earnings, even when someone else is the beneficiary. Can creditors take life insurance money? Most states shield life insurance paid to a named beneficiary from the insured's creditors, but not if the estate is named. Cash value rules vary by state. Elder financial abuse involving life insurance How older adults lose money through life insurance: forged beneficiary changes, drained cash value, pressured sales. Warning signs, safeguards and reporting. Guaranteed vs non-guaranteed values in a policy illustration What the guaranteed and non-guaranteed columns of a life insurance illustration mean, how they differ, and how to stress-test a projection before you buy. How cash value is taxed: withdrawals, loans and surrenders Cash value grows tax-deferred. Withdrawals are tax-free up to your premiums paid, loans usually are not income, and a surrender above basis is taxable income.

Related tools

Keep, surrender or sell your policy? Compares cashing in a policy, selling it in a life settlement, and keeping it, using the return your beneficiaries earn on what you keep putting in.