Life insurance

How to Calculate the Cash Surrender Value of Life Insurance

Did you know you can sell all or a portion of a life insurance policy, even term insurance?

(3 minute read)

When someone has an unwanted or unneeded life insurance policy, it’s a wise move to think about ways to turn the liability of the premiums into a lump sum of cash. Surrendering a universal life policy, whole life, term policy, or any permanent life insurance policy means the insurance company will pay you a portion of the value in exchange for cancelling the benefit. How do you know what the cash surrender value adds up to? We’re going to simply explain how this is calculated.

How Do I Find The Cash Value of My Life Insurance Policy?

There are two types of life insurance surrender value: guaranteed surrender value and non-guaranteed surrender value.

  • Guaranteed Surrender Value is available after three years of holding the life insurance policy. This value is usually around 30% of the premiums you have paid, not including the first year. Between years 4-7 of holding the policy, this goes up to 50%. After year 7, the insurance company will have to make unique calculations based on your circumstances. This is why life insurance policies build up value over time; the more premiums you have paid, the greater the guaranteed surrender value.
  • Non-Guaranteed Surrender Value reflects the value of investments and bonuses associated with the insurance policy, as well as your paid premiums. This amount can be higher than the guaranteed surrender value if you have held the policy for many years. However, the penalties are the same or greater as a guaranteed surrender.

How to Calculate the Cash Surrender Value of a Life Insurance Policy

To calculate the cash surrender value of a life insurance policy, add up the total payments made to the insurance policy. Then, subtract the fees that will be changed by the insurance carrier for surrendering the policy. This way you will learn the total actual payout you would receive from  surrendering a life insurance policy. 

Is There a Life Insurance Payout Calculator?

There are many calculators online to help you understand and calculate the  surrender value  of a life insurance policy, but not many that help you understand the cash value you would receive if you surrender the policy. This is no doubt in part because many times, the surrender value of the policy is so low compared to the benefit! The average surrender value of a life insurance policy is $460 for every $100,000 in value.

We provide a life insurance settlement calculator to give our clients a clear, immediate picture of the highest possible value they could get from selling a life insurance policy in a settlement. Qualifying for a life settlement is based on age, how long you’ve had the policy, annual premium paid, its benefit value, and other factors. But if you are approved, a life settlement can bring far greater return of your money on the same investment than any surrender value.

Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home or any other valuable asset that will create immediate cash. Contact us today to learn more.

I am always happy to answer any and all questions about these life-transforming transactions.

Leo LaGrotte
Life Settlement Advisors

Get in touch with Life Settlement Advisors today to take the first step toward converting your policy into cash.
Life Settlement Advisors
Leo LaGrotte
At Life Settlement Advisors, we strive to be a voice of confidence and assurance for our clients. Our goal is to educate you about the life settlement process so you can make an educated decision about whether it is right for you.

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