What happens when a cash value life insurance policy is surrendered in California?

When a cash value life insurance policy is surrendered, the policyowner is entitled to receive the policy's cash surrender value, after deducting any outstanding loans or charges against the policy. This means that the cash value represents the amount the insurer will pay to the policyowner when they choose to terminate the policy prior to its maturity or the death of the insured.

The cash surrender value is calculated based on the accumulated value within the policy, which is built up over time through premiums and interest. However, if there are loans taken against the policy, those amounts will be subtracted from the cash surrender value. It’s important for policyowners to understand this process, as it allows them to access some of the money they have invested in the policy while also taking into account any debts they owe to the insurer.

Other choices do not accurately reflect the process or implications of surrendering a cash value life insurance policy, such as forfeiting all cash value or waiting for the policy to mature. The immediate payout of the death benefit upon surrender is also not aligned with standard practices for cash value policies.