Cash Surrender Value vs. Face Value (Life Insurance) Author:    Posted under: Life InsuranceLife Insurance questions answeredLife Insurance Types


As a consumer, life insurance for me is a complex matter. It takes a lot of focus to really understand its components. You can’t just take it as it is. There are different factors to consider before signing up for one. You have to be diligent so that you’ll get your money’s worth.

In the early days of life insurance, policyholders have a straightforward knowledge as to what it really is. It’s an insurance that will pay up as soon as they die. In short, the beneficiaries will get the full amount stipulated in the policy.

Today, many, if not all life insurance companies have products that they link with life insurance policies that will make prospective clients take notice. It’s like putting an extra topping on the cake or most of the time, toppings. Yes, insurance companies made it their business to add more freebies or benefits to their life insurance policies.

Allow me to present and contrast two kinds, but rather typical benefits of life insurance policies.

The first and most common is the FACE VALUE of the insurance policy. This refers to the amount of money the beneficiaries get in the event the policyholder dies. Simply put, this is a death benefit.

The second is the CASH SURRENDER VALUE. Also known as “cash value”, “surrender value” or “policyholder’s equity”, this refers to the amount of money that will be given to the policyholder should he or she decide to cancel the policy for whatever reason before maturity. Since the cash amount is withdrawn before maturity, it is expected that the amount the policyholder will get (upon withdrawal) is sometimes less than the premium amount paid.

Which is better then? Many will say that the FACE VALUE benefit is better since you will be assured that your family will be taken care of or secured even when you pass away.

There are those who think that CASH SURRENDER VALUE benefit is the better choice since you will get to enjoy your money while you are still healthy and strong. And some would argue that they might need the money for emergency purposes.

It is really up to the policyholder to decide what he wants to do with his money or his policy. It is good to know, though, that life insurance companies have come up with options such as these that will help policyholders whenever they might need it.

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