Cash Surrender Value

We’re talking life insurance, which can be immensely confusing itself. The cash surrender value is referred to as the cash value of that permanent life insurance product, surrendered upon your choice to pay for your premiums, buy more coverage, exchange for an annuity, or simply use as a loan or lump sum to purchase your new yacht…minus any applicable fees, of course, or operating costs, or transfers, or withdrawals, or loan payments, or any other ambiguous fees that the insurance company has deemed fit to charge to its clients.

Clear as mud? We thought so.

Here’s an example. You buy a permanent life insurance policy that will leave your loved ones millions upon your death. To buy this lovely policy, you make premium payments to support this immense death benefit (lucky them). You decide that they don’t deserve your millions after learning about the hitman they hired, and you want out of the policy.

Of course your cash value (premiums paid plus growth minus fees) is different from the face value (the millions you were going to leave your ungrateful family upon your death), but you take the lump sum cash value anyway to buy your yacht.

Sounds like a reasonable scenario, right? Just make sure you share the details of the cash surrender with your tax guy, or the IRS will send you a nice little love note asking you to surrender some cash to them.

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Finance: What is Life Insurance (Term v....45 Views

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Finance allah shmoop What is life insurance Term versus variable

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The smackdown and there's A reason that warren buffett is

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one of the wealthiest men in the world He sells

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insurance great industry great profits usually And great record of

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no complaints from the dead Let's Start with term life

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insurance The easiest kind of insurance on the planet tau

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understand Meet don vannucci He has a wife and two

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new kids Twins babies Same hairstyle is their dad Don

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is a contract assassin with the nsa as a big

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client And he knows that one day there probably is

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a bullet with his name on it Or worse So

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he buys for fifty bucks a month Term life insurance

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which pays his wife three hundred grand if he dies

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pretty much for any reason Unless she is the one

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who kills him and that can be proved in a

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court of law And well you know with his snoring

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and you never know You know i've been there So

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a month goes by He pays the fifty bucks term

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life insurance and does not die So what happens Well

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the insurance company keeps all the money and yes there

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Were brokerage fees in here but they're relatively small for

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this very competitive easy to understand kind of insurance Well

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the year goes by in twelve payments of fifty bucks

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or six hundred dollars He's not dead yet and the

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insurance company keeps all the dough Yeah huge profit margins

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And in fact with don at thirty two years old

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well in any normal career like you know being a

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dia trist or a stockbroker realtor something like that his

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life expectancy would be for some fifty more years or

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more than that of paying that term life policy So

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if he lives that fifty years while that would be

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six hundred payments at fifty bucks a month for a

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very long time with then escalating payments as he gets

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older and you know more likely to die that month

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Well the key determining feature in term life however is

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that should don ever stop paying his monthly premiums because

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he chose not to not because he is dead Then

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the policy is just cancelled all of those previous payments

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which he could have invested in the stock market and

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let compound away growing it in his percent a year

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Well they're all owned by the insurance company which took

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his six hundred dollars a year each year for decades

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and grew it to be worth hundreds of thousands of

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dollars by investing it But since don didn't do that

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in all fairness at thirty two it didn't seem like

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he'd last all that long especially having been given the

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afghanistan well then he loses all his back payments when

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he cancels at age seventy two just in time for

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the assassin who's been contract id to take him out

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you know finds him so that's term life terminal life

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All right well then what's variable life Well variable life

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views that fifty bucks a month in payment as a

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kind of sort of investment albeit not necessarily a great

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one Had don gotten a variable life policy instead of

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a term life policy and then paid into it for

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forty or fifty years and then stopped Well he might

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have accumulated cash surrender value of some forty fifty sixty

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grand or so that is he would have assumed some

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market risk as the insurance company invested the money and

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he would have at least gotten back some of his

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hard earned after tax dough that he invested for so

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many years between you know assignments A shame Never heard 00:03:33.47 --> [endTime] the big guy coming

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