Cash Value vs. Surrender Value: Which is better for you?

Cash value vs. surrender value compares what your accumulated life insurance savings look like before and after you withdraw money from insurance savings. Cash value is the sum of the money you paid, but surrender value is money you get back from the life insurance company after fees. Compare companies and shop around to find the best life insurance rates and surrender fees.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent

UPDATED: Jul 19, 2021

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Quick Facts

  • Cash surrender value is the sum of money you receive from your life insurance company after the company applies applicable surrender charges.
  • You can borrow against your permanent life insurance policy and maintain good credit.
  • Any loans you haven’t paid back are deducted from your death benefits or your overall cash value.

Some professionals will make cash value vs. surrender value sound like a difficult concept, but our article breaks it down into an easy-to-read guide.

Cash value and surrender value are common among annuities and permanent life insurance policies. For this guide, we’ll focus on how both values affect life insurance.

If you want to compare cash value vs. surrender value with a life insurance company, enter your ZIP code in the free comparison tool above to see life insurance quotes from different companies.

What is the difference between cash value vs. surrender value?

If you have permanent life insurance, you’ll come to know the difference between cash surrender value vs. cash value. Although they sound like they’re the same, these two permanent life insurance factors are quite different.

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How is cash value different from death benefits?

Cash value is money you build from a monthly premium, while death benefits provide your beneficiary a financial blanket after the insured has passed away.

According to the Internal Revenue Service (IRS), death benefits paid to a beneficiary aren’t gross income and don’t have to be reported. However, any money you receive (i.e., surrender value) is considered taxable income.

What is a cash value?

This is the sum of money you’ve built up while paying for life coverage. Term life policies don’t have values, but permanent policies do.

How does it work?

As you pay your rates per month, a portion of your monthly payments goes toward an account, and the other part goes your policy. The account holds your accumulated cash.

Some accounts allow you to make investments, such as bond portfolios and other types of investments.

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What is a cash surrender value?

This involves the amount you’ll receive from your provider when you want to access funds. Any early withdrawals come with a penalty. However, penalties won’t affect your credit.

How does surrender value work?

You can withdraw the accumulated premiumsmoney value. When you take money from your cash value, the surrender fees will be applied. Therefore, you won’t receive the full amount.

Surrender fees, or surrender charges, are based on a percentage. Each company that provides a permanent policy has a different percentage. Shop around until you can find a surrender charge that works for you.

What is an example of cash value life vs. cash surrender value?

Let’s say you buy a permanent life insurance policy, such as a whole life insurance policy, and you have a death benefit of $250,000. If you make $1,000 annual premium payments for 15 years, you will have a $15,000 cash value.

Before you withdraw your cash value, you see that a 30 percent surrender fee will affect your cash value when you take money from your life insurance account. The surrender charge will deduct $4,500 from your $15,000 cash value. Therefore, your surrender value is $10,500.

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Can I borrow money against my life insurance?

You don’t have withdraw money from your life insurance account. Did you know you can borrow against your death benefits?

Permanent life insurance companies allow policyholders to get a loan against their death benefits. However, an unpaid loan will decrease death benefits to beneficiaries.

Does permanent life insurance fit your lifestyle?

There are many benefits to permanent insurance policies like whole life insurance, but is it something you need to have?

Let’s examine the differences between term life insurance coverage and permanent life insurance products.

SBLI Average Monthly Rates for $100,000 Term Life Insurance by Policy Length for Non-Smokers
Age of Non-Smoker
Average Monthly Rates for $100,000/10-yearAverage Monthly Rates for $100.000/20-yearAverage Monthly Rates for $100,000/30-year
25$8.12$9.09$11.91
30$8.16$9.13$12.51
35$8.22$9.40$13.50
40$9.52$11.35$18.09
45$12.23$15.60$22.92
50$15.15$21.45$34.35
55$19.49$31.54N/A
60$28.35$50.52N/A
65$49.50N/AN/A
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Some permanent insurance policies have many complex concepts, such as universal life insurance and variable universal life insurance. Term life policy is much simpler and much cheaper, but this type of life policy doesn’t have the savings benefit like a permanent policy.

Cash Value vs. Surrender Value: What is the bottom line?

A cash value can be useful, especially for policy owners who have had their life insurance policy for a while. If you need cheap life insurance plans, you may want to explore term life insurance quotes. To access more saving and investment opportunities, buy life insurance policies like whole life and universal life.

Affordable life insurance is obtainable. Find a permanent life insurance company with decent cash value policies vs. surrender value percentage by entering your ZIP code in the free online tool below.

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