Life Insurance Surrender Value Calculator

Surrender Value Formula:

\[ SV = (Premiums Paid \times SV Factor) - Loans \]

Surrender Value (SV):

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1. What Is Life Insurance Surrender Value?

The surrender value is the amount a policyholder receives from an insurance company when they decide to terminate a life insurance policy before its maturity date. It represents the cash value accumulated in the policy minus any outstanding loans or surrender charges.

2. How Does the Calculator Work?

The calculator uses the surrender value formula:

\[ SV = (Premiums Paid \times SV Factor) - Loans \]

Where:

\( Premiums Paid \) — Total amount of premiums paid into the policy
\( SV Factor \) — Surrender value factor (decimal between 0-1)
\( Loans \) — Any outstanding loans against the policy

Explanation: The surrender value factor is determined by the insurance company and typically increases the longer you hold the policy. It represents the percentage of your premiums that are available as cash value.

3. Importance of Surrender Value Calculation

Details: Calculating surrender value helps policyholders understand how much they would receive if they cancel their policy, allowing for informed financial decisions about continuing or terminating coverage.

4. Using the Calculator

Tips: Enter the total premiums paid in currency, the surrender value factor as a decimal (e.g., 0.75 for 75%), and any outstanding loans against the policy. All values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What affects the surrender value factor?
A: The factor is influenced by policy duration, type of insurance, company policies, and how long the policy has been in force.

Q2: Are there surrender charges?
A: Many policies include surrender charges, especially in early years, which are typically incorporated into the SV factor provided by the insurer.

Q3: When does a policy acquire surrender value?
A: Most policies acquire surrender value after premiums have been paid for a minimum period, typically 2-3 years.

Q4: Is surrender value taxable?
A: The portion that exceeds the total premiums paid is generally considered taxable income.

Q5: Should I surrender my policy?
A: Consider alternatives like policy loans or reduced paid-up insurance before surrendering, as you'll lose death protection.