Does a life insurance policy that is paid up have cash surrender value?
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Asked March 20, 2015
Some types of life insurance have a cash surrender value, while others do not. Term life insurance, for example, does not have a cash value, and if you surrender the policy the amount that has already paid is forfeit. However, if the term life policy is paid in advance and then surrendered, you would be eligible to receive any amounts paid on future coverage but would not receive any of the past premiums.
Most types of permanent life insurance carry a cash value. If the policy lapses or is surrendered, the owner of the policy is eligible to receive the full accrued cash value along with any prepaid values.
Policies with a cash value offer other options to the policy owner. If you are considering the idea of surrendering the policy but it has a paid up value, you may be able to arrange the policy so that future premiums are subtracted from the cash value. This would not return any cash value to you, but it would keep the policy in force during hard financial times without any additional out of pocket expenses.
As far as the face value of a life insurance policy goes, there are very few options available to allow you to collect on that amount. Some companies will allow you to file an early claim, effectively regaining a portion of the policy, but this tactic is usually reserved for people who develop hardship conditions, terminal illnesses, etc. This feature must be written into the original life insurance policy, such as a critical illness clause.
Answered March 25, 2015 by Anonymous