The surrender value or cash value is the sum of money that an insurer pays to a policyholder when the policy is terminated or surrendered before its maturity. It is the savings portion of policies such as whole life and endowment.
Some policies, such as term life insurance, do not have a cash value. So when they are terminated, the customer gets nothing back.
Do note that the surrender value is not the same as the face value, also known as the actual death benefit, of an insurance plan. The latter is the amount that will be paid to beneficiaries as long as the terms of the policy are met.
The face value is always more than the cash surrender value.
Why is it important?
The cash value of policies typically does not build up until after the second or third year. This means that if you choose to terminate in the initial years, you may get nothing back.
Policies with surrender or cash value can be used as collateral for a loan, so policyholders can opt to take a loan from the insurer by borrowing against the cash value of their plans.
So you want to use the term. Just say...
'I surrendered my insurance policy so that I could use the cash value for my daughter's tuition classes.'
