What does the phrase ‘surrender your life insurance’ mean?

"Surrender your life insurance" refers to the process of canceling a life insurance policy and receiving the cash value that has accumulated in the policy. Here are some key points to keep in mind:

• Surrender value: When you surrender a life insurance policy, you are entitled to receive the policy's surrender value. This is the amount of money that has accumulated in the policy, minus any fees or penalties.
• Cash value policies: Surrendering a life insurance policy typically only applies to cash value policies, which are types of life insurance policies that have a savings or investment component. These policies build up cash value over time, which can be used to pay premiums or withdrawn by the policyholder.
• Term policies: Term life insurance policies, on the other hand, do not have a cash value component and cannot be surrendered for cash.
• Surrender fees: Surrendering a life insurance policy may result in surrender fees or penalties, depending on the terms of the policy. These fees may be deducted from the policy's cash value, reducing the amount that the policyholder receives.
• Tax implications: Surrendering a life insurance policy may have tax implications, as the cash value that is received may be subject to income taxes. It's important to consult with a tax advisor before surrendering a policy to understand the potential tax consequences.
• Alternatives to surrendering: If you need cash and are considering surrendering your life insurance policy, there may be alternatives to consider, such as taking out a loan against the policy or selling the policy in a life settlement transaction.

In summary, "surrendering your life insurance" means canceling a cash value life insurance policy and receiving the accumulated cash value, minus any fees or penalties. It's important to understand the potential tax implications and alternatives before making this decision.