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.

Runs entirely in your browser: nothing you enter is sent or stored by this site. Results are estimates for planning, not a quote or advice.

How to use it

  1. Enter the policy's death benefit and the premium you would keep paying each year.
  2. Enter the cash surrender value from a surrender quote. That figure is already net of surrender charges and policy loans.
  3. Enter your cost basis: the premiums you have paid, minus any untaxed withdrawals or dividends taken in cash.
  4. If you have a life settlement offer, enter it. The tool's help text says offers are usually available only to people 65 or older or in poor health.

The first table lists the choices side by side. The second table shows what keeping the policy earns for your beneficiaries if death occurred in 5, 10, 15, 20 or 25 years.

How the math works

Surrender pays the cash surrender value. The tool estimates the taxable gain as the surrender value minus your basis, never below zero.

Sell shows your offer and whether it is more or less than surrendering.

Keep treats the cash you leave in the policy as money you give up today, then adds each year's premium. The tool solves for the yearly rate at which that money grows to the death benefit by the end of year N. It is an internal rate of return, with the first premium due immediately.

Hypothetical example, using the tool's starting values: $250,000 death benefit, $4,000 a year in premiums, $40,000 of surrender value and $50,000 of basis. Surrendering pays $40,000 with no estimated gain, since the value is under basis. If death occurred in 10 years, the money put in is $80,000 and the return is about 14.7% a year. At 20 years it is $120,000 and about 5.1%; at 25 years it is about 3.4%.

What it assumes

  • Premiums stay level, and the death benefit you enter is what your beneficiaries would receive, so subtract any loan first.
  • The death benefit is paid at the end of the year you pick. The tool does not weight the years by the chance of dying in each.
  • Taxes are indicated, not computed. Surrender gain over basis is generally taxable as income, and the tool says taxes on settlements are more complex and calls for a tax professional.
  • All figures are yours. The tool uses no outside data.

Where it stops being right

  • The return is high early and low later, which is normal. Keeping pays best when the insured is unlikely to live long, so the life expectancy calculator and your health matter here, and the tool does not use them.
  • It compares dollars only. It does not value the insurance for a dependent who needs it, a loan balance, or the loss of insurability if you cancel and later want coverage.
  • It leaves out in-between options. The tool's note points to reduced paid-up insurance, a 1035 exchanges: swapping policies without tax and a life settlement sale; see nonforfeiture options: reduced paid-up and extended term for what happens when you stop paying.
  • A surrender may carry a surrender charge, which is why the quote matters more than the policy's headline cash value.

The surrendering a life insurance policy: what you get and what it costs guide covers the steps. For a policy with a loan on it, run the policy loan calculator first.

Last reviewed October 4, 2026

Related guides

Surrendering a life insurance policy: what you get and what it costs What happens when you cancel a permanent policy for its cash surrender value, how the payout and tax are figured, and the alternatives to compare first. Life settlements: selling your life insurance policy How selling a life insurance policy works, who regulates it, what rescission rights and disclosures to expect, and how the sale is taxed after Rev. Rul. 2020-5. 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. Nonforfeiture options: reduced paid-up and extended term What you can do with a permanent policy's cash value if you stop paying premiums: take cash, buy reduced paid-up insurance or extended term, and how each works. Life insurance surrender charges explained What a surrender charge is, how long it lasts, how it reduces what you receive when you cancel a permanent policy, and the alternatives to surrendering. How to cancel a life insurance policy, and when not to How to cancel term or permanent coverage, what you get back, the fee and tax traps, and when keeping or changing the policy beats canceling.

Terms used here

Cash surrender value What a permanent policy pays the owner on cancellation: the accumulated savings minus surrender charges and any outstanding loans. 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. 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. 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. Viatical and life settlement providers Licensed companies that buy life insurance policies from their owners for a lump sum, then pay the premiums and collect the death benefit later.

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