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Whole Life Insurance Cash Value: 6 Questions And Answers

Mar 29, 2008
Here are a number of questions and answers concerning whole life insurance cash value and cash surrender value. This article may help you to gain a better understanding of certain aspects of a cash surrender value.

Question #1: What is a cash surrender value?

A cash surrender value is the sum of money that a life insurance company pays the insured if she decides to stop the life insurance policy before she dies. The cash surrender value of a life insurance policy is not founded upon its real value, but upon its reserve value. This is the face amount of the contract discounted at a precise rate of interest in relation to the life expectancy of the assured person. Certain administrative expenses may also decrease the total cash surrender value.

Question #2: How does cash surrender value work?

The insured person receives the cash surrender value in the event of her life insurance policy being abandoned. This event frequently involves a whole life insurance policy. This normally results in a whole life insurance cash value payment being collected by the insured party.

Question #3: Why is a cash surrender value necessary?

The cash surrender value should not be confused with the face value of a life insurance policy. The face value of the life insurance policy relates to the sum that will be paid out to the listed beneficiaries provided that the terms of the policy were satisfied. Cash surrender value, on the other hand, is to be paid to the insured when she decides to cancel the life insurance policy. The cash surrender value will be a much smaller amount than the face value amount of the policy.

Question #4: When does the cash surrender value become payable?

The cash surrender value becomes payable when the policyholder decides to end the life insurance cover of her life insurance policy before it pays out due to the death of the policyholder.

Question #5: Where do you find the cash surrender value?

The cash value can be found in the investment section of most whole life insurance policies. The cash surrender value pertains to the savings aspect of a whole life insurance policy that is due prior to the death of the assured person.

Question #6: How does whole life insurance cash value function?

A whole life insurance policy normally consists of life assurance as well as an investment or savings section. A part of the life insurance premiums you pay may be invested by the life insurance company in stocks and bonds. This part builds up a cash value that the policyholder can remove or have a loan of.

The amount of the whole life insurance cash value relies upon the type, size and current age of the whole life policy. The increase in the whole life insurance cash value is tax deferred under existing federal income tax law.

You may have a loan of money from the whole life policy's cash value in the form of a policy loan at the contemporary policy loan interest rate. The death benefit and cash surrender value is diminished by the borrowed amount. If the policy loan is not repaid, the death benefit is decreased by the sum of the loan plus interest.

I hope this article was useful to you. I encourage you to read carefully on the subject of cash surrender value and whole life insurance cash value.
About the Author
Copyright 2008 - Daniel Theron. You can visit wholelifeinsurancecashvalue.com for more insurance related information. You may read a cash surrender value definition at http://law.jrank.org/pages/5056/Cash-Surrender-Value.html.
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