A life insurance surrender is a full cancellation of a life insurance policy, usually for the cash surrender value.  You are allowed to surrender your policy at any time, though charges may apply during the initial policy years.  Surrender does not affect your credit score, and a surrender of your policy will not affect your ability to get a new life insurance policy in the future. In permanent policies that have a cash value, the surrender charges are a percentage of the value of the policy. These are taken directly from the cash value before it is paid to the owner. A term life insurance policy does not have any surrender fees because it has no cash value.

People have many reasons to surrender a policy, though they should often reconsider before giving the policy up. Other times, there are good reasons to terminate the coverage. What happens a lot of times is that after owning life insurance for a number of years, people have financial changes in their lives. The changes are not always directly financial. For instance, sometimes people used to have children dependents that no longer require support.  Sometimes things like divorce, death, financial windfall, or even a greater need for cash in hand contribute to people deciding they no longer need the protection afforded by life insurance.

The good news for people who are giving up their policy is that permanent forms of life insurance will build cash value over time as long as they are funded properly, and upon surrender, the policy owner receives these funds. The process to surrender a life insurance policy is relatively straightforward and simple, but if a surrender needs to happen fast it is best to understand the procedures so there are no hiccups. People should always carefully consider surrendering their policy because they may not be able to buy a new life insurance policy depending upon their age and health.

Reasons For Surrender

These are the biggest reasons that people would consider surrendering their policy. These reasons are not right for everyone, should you should always check with your life insurance agent or financial advisor.

Cash Value

The big advantage of surrendering a life insurance policy is the access to the cash value. When a policy is surrendered, it does not merely cease premium payments, it also releases all the saved value to the client (assuming they have not withdrawn or loaned it from the policy already). Generally speaking, the older a policy is and the longer it has been active, the higher the cash value will be. People often surrender their life insurance contracts as one of the first ways to pay unexpected expenses such as house repairs or to get through a period of unemployment.

People may also pay off high-interest rate debt with this money, such as a credit card. They can also pay emergency bills instead of using credit cards.

Superfluous CoverageSurrender

People also surrender life insurance contracts because sometimes they might not need the coverage anymore.  Many people have owned whole life insurance policies for over 20 years.  During this period of time, many life changes may have taken place.  Children may have grown and are no longer dependent on their parents for support, marriages may end in divorce and life insurance is not needed to protect an ex-spouse, companies may be sold and key man insurance is no longer needed, or a beneficiary may predecease the insured and the coverage may be unnecessary.

The coverage can also become superfluous if another policy provides all the protection that is needed. A spouse may have a spousal rider for instance or coverage provided by work may give the insured person enough coverage.

Cheaper Coverage- Especially From Better Health

Sometimes an insured person may find less expensive coverage from another company.  This may be because they never comparison shopped for insurance in the first place and ended up paying more than they should have, or it may be for other health-related changes.  If the insured person goes through a major shift in health in a positive direction such as weight loss, a new policy may actually be less expensive than the old.  While people can apply for a better health rating with an existing policy, they may not be granted a better rating.

Prices of term life insurance typically drop over time, because people live longer and die young less often. These improving mortality statistics have led to insurance companies dropping prices to be more competitive. A new policy may give the insured the opportunity to have the same coverage for less expense.

How To Surrender A Policy

Surrendering a life insurance policy is quick and easy in most cases.  A life insurance company is limited by law to how long they can legally hold onto a client’s money after a surrender request is received.  To surrender a policy, simply follow these procedures.

  1. Contact your insurance provider and inform them of your intent to surrender.  Request a surrender form and ask if a letter of instruction will be sufficient to surrender the policy.
  2. Fill in the surrender form exactly as required, or write the letter of instruction.
  3. Send the surrender form to the company in a manner that can be tracked such as priority mail or registered mail.
  4. Call to confirm the company received the request after the tracking indicates that they have.
  5. Receive your funds in a short time.

A term life insurance policy does not necessarily need to be surrendered. You could always just stop paying it. Your coverage will expire and you will still be covered during the grace period, and after that, it will lapse. There are not really any negative consequences to doing this other than it won’t give you a pro-rated refund of pre-paid premium if the life insurance company is willing to refund the prepaid premium on a prorated basis, and they are not always willing to do this.

Reasons not to Surrender a Policy

While it may be tempting to surrender a policy people should always understand all of the options and consequences. There may be tax consequences, charges, and the lost coverage may be detrimental because the beneficiaries lose the protection. There may be other options besides a full surrender that works better for the owner.

Tax Consequences Of Surrender

Generally speaking, any financial gain in your policy will be taxed as income, at your marginal income rate of taxation.  The amount of money you put into your life insurance policy, known as the cost basis, is not subject to taxation because after-tax dollars were used to fund the policy.  Policy owners should always consult with a qualified tax adviser if they are concerned about possible taxation upon surrender of a life insurance policy. In certain situations, there may even be tax penalties.

Surrender Charges

Some life insurance policies, especially variable universal and universal life insurance policies, may have surrender charges for the first 10-15 years of the policy.  A surrender charge is a charge from the cash value imposed by the insurance company for surrendering the contract early or withdrawing money early.  Surrender charges can be very significant, especially in the early years of a policy.  Always be aware of any possible surrender charges on your life insurance policy before you purchase the policy, and before you withdraw any money or surrender the contract in full.

While surrendering a life insurance contract may cost your beneficiaries lost death benefits, sometimes surrendering a life insurance contract is unavoidable or advantageous for the owner.  It is a comfort to many to know that a readily available source of money is so easily accessible.

Alternatives to Full Surrender

There are options available for someone who would like to keep their coverage, but either can’t afford to keep it or need money from their policy. Depending upon the situation, a partial surrender may be helpful. A partial surrender can give the owner access to some of the cash, while also maintaining some of the coverage. This will also reduce the premium payment proportionally with the amount surrendered going forward. On a term life insurance policy, the owner could save with a “face amount reduction”. This reduces the amount of coverage but also lowers the premium payment.

Loans may also be helpful for someone who temporarily needs cash or can’t afford to pay for the policy. A loan can be used to pay the premium if someone temporarily can’t afford it, such as during a job change. A loan can also provide access to up to 80%-90% of the value of the policy for an owner who needs the cash.

If the policy pays dividends, keep in mind that dividend payments can be used to directly pay premiums. If someone is using the dividend to buy more paid-up insurance, this is a fantastic way to get the policy to pay for itself.

Should You Surrender Your Policy?

There is no right or wrong answer. People should consult with their financial advisor, accountant, and review all of the available options to decide if surrender is right for them! Feel free to reach out to us with questions or to compare rates on new policies.


  1. I have Exide life bond,I paid only one year premium,then some unavoidable circumstances, unable to pay premium,now what can I do for refund

    1. Hi Ramana. I suggest you go for full surrender. They may not refund you in full but definitely you will get about 70% of your contribution.

  2. I have a Term Life Policy with (a company), bought in 1978; it was for $10K, Cash Value Present: approx. $17K (this company) is horrible to work with. I’ve been trying to have my beneficiary change in 1987, when I married, to my husband; in 2018, (this company) never changed my beneficiary, they had my mother, by the time I changed beneficiary y mother past away in May 2019. Now, my name change, (this company) wants me to send a copy of my Social Security card,. Drivers License and Marriage Certiifcate and there Name change form to a P.O. BOX; addressed to Customer Service.!! I’m having a tough time sending this vital information to a P.O.!! I don’t want to deal with (them), everything I’ve asked to changed or meet with a financial adviser from (them); drive to the meeting in heavy Los Angeles traffice 45 minutes and the advisor missed the appointment/ He tried to blame me, but I had my proof, SILENCE from Prudential. I received not one apology. I HATE (this company) and want to never see or hear of them again. What do you advise?

    1. Hi Shirley! Contact us and we can help you work with another company!

  3. Mpiyakhe Petrus Nhlumayo

    I want to surrender my funeral policy of 15 years and I do not know my policy number and there are clientele offices where I am based what should I do to surrender.

    1. Andrew @ LifeAnt

      You should be able to surrender your policy as long as you at least know the company that you have your policy with. Just call up your life insurance company and tell them that you want to cancel your policy and they should be able to help you through the process. They should be able to tell you your policy number once you verify your identity.

  4. Can I surrender educational policiy and Funeral policy i need the cash urgently

    1. You can! Contact your life insurance provider about the current value of your policies and the process for surrendering them.

  5. I own the policy of a 101-year-old lady, and I want to surrender the policy and put the cash into a CD I have set up for her. However, I can’t find a decent surrender letter. Please advise.

    1. Contact the life insurance company. You can use their form. Separately, a simple letter usually suffices. Something along the lines of “I wish to surrender my policy immediately. Please mail me a check for the surrender value” Sign and date the letter.

  6. George A Sanchez

    I have 25 year policy life insurance , I’m disabled 45 and homeless need cash and wish to cancel it and obtain cash value. How do I go about it with no problems from company .

    1. If you have a 25-year term life insurance policy, the policy most likely does not have any cash value. Remember, only permanent life insurance has a surrender value (except for a few weird hybrid policies that exist). To cancel, contact your life insurance company and obtain a cancellation form. Or if you stop paying, the life insurance will lapse and you will not have any effect on your credit from it.

  7. I surrendered two different life insurance policies. They were mailed together. Yet I only received a check for one. How come they were not both processed at the same time?

    1. Maybe there was an issue with one of the forms. You should contact the insurance company. Perhaps the forms were submitted for processing separately, but still should be processed within a day or so of each other.

  8. The form to surrender a policy was turned in. The agent said it would not be processed for 10 days to two weeks. The person who had been insured died 20 hours later. The company heard about the death over the emergency call and worked over the weekend (which farm bureau never does) to get the claim finalized for the surrender value although they had indicated earlier it would not be finalized for two weeks.

    1. Did you call the company to retract your surrender? That should have been your first move if not. I suggest notifying them to disregard the surrender, and be honest and say that the insured passed away. Do not feel pressure to have the death claim “beat” the surrender form. This will not work.

  9. I am 45 yr old and 3 years back, I bought a met life whole life insurance (20 yr select) with annual premium around 32 k and death benefit 1.3 million. I have paid 3 and 1/2 year now with a total
    I do have 1 personal and 1 work associated 1 million dollar term life insurances to protect finances of my family in case of an early death.
    I feel paying off house in next 15 year will be a
    Now I realize, that I cant expect high earnings for next 17 years to be able to pay this premium, also vulnerability of these insurances companies are once again exposed form recent crises.
    what are my options

    1. Before you surrender the policy, ask the agent to illustrate your premiums if you use dividends to offset the premiums. Your premium should become lower and lower each year, and after 17 years it is possible that dividends will pay the entire premium. If you can not afford the policy, you can surrender it. I recommend that you try to replace the coverage with a term policy before you surrender the whole life policy. You can also reduce the face amount of the whole life policy which will reduce your premium. You can supplement that with term as well to replace the reduction of face.

      1. thanks

  10. It there an IRS penalty for surrendering a policy before 59 1/2 years of age? The form mentions this, but I’m thinking it doesn’t apply to surrendering the policy
    Thank you for the info!

    1. No there is not, only if your policy is a MEC, and only if you have a gain.

  11. I have paid on a whole life insurance policy of now an x wife for 15 years, which now has cash value. She is the owner and I am the beneficiary of the policy. She has not died but is now at an age that the cost wil be too expensive to continue. I don’t know where she lives or have any contact with her or her family . When I stop paying the premiums what will happen.

    1. Andrew @ LifeAnt

      Hi Mark,
      The simple answer is, the policy will cancel once you stop paying premiums. However, you should find out exactly what type of policy it is. If it’s a term policy, then there is no cash value and the policy will simply cancel. A term policy would make the policy more expensive to pay with age if the term has expired, as you indicated. But if it’s a whole life policy, the premiums shouldn’t be increasing. She would have cash value built up that she would lose if you stop paying the policy. She could withdraw that cash value amount to surrender the policy, but only she can do that.

  12. Once a surrender has been submitted to a company is their a way to reverse or stop it, if you change your mind

    1. Andrew @ LifeAnt

      Hi Seth,
      It depends how long ago this all happened. Each insurance company has a different way and different speed of processing things and handling requests, so it could be possible. You’ll just want to contact your insurance company as fast as possible and tell them that you don’t want to surrender your policy and that you want to keep it, and see if there is anything they can do to help you.

  13. Lehlohonolo Claudia Magoma

    Hi. My late dad had a police at Regent and I just recieved a call from the Regent Office,I took the surrender option,can you please explain to me what’s going to happen next,thank you.

    1. Andrew @ LifeAnt

      Hi Lehlohonolo,
      It depends on the type of policy he had. If your dad was the owner, then did he pass away? You wouldn’t be able to make any changes unless he passed away, at which point you wouldn’t surrender the policy, the policy would pay out the benefit money to the beneficiary. If that’s you, then you should receive a check for the benefit amount but will likely have to fill out a form. If you somehow were able to take over the policy and chose surrender, then basically the policy cancels and you would receive a check for whatever amount the cash value has built up to be.

  14. I’m currently in the 2nd week of my 20 year term ($100,000.00) for a 31 day grace period. I can’t afford to continue paying the premiums at $928.00 monthly. The insurance just sent me a Full Surrender form although they told me the term policy has no cash value. What should I do? Thank you so much. Janet

  15. Andrew @ LifeAnt

    Hi Janet,
    That would be correct, if you have a term policy then you don’t have any cash value. If you can’t afford making the payments on a term policy, then there really is no other option than to surrender or cancel the policy. You won’t receive any money back and you won’t have a life insurance policy anymore, but you won’t have that payment either. You could always try to buy a new policy for a lower benefit amount that you can afford. If you’d like to see what your options are, you could start by filling out the form at the top of this page.

  16. My Dad has a $75,000 whole life policy since 1984. He has paid almost $40,000 in premiums. He wants to surrender the policy. The net cash value is about $60,000 (41K cash value + 19K dividend). Does this make sense? He is retired and has been sick.

  17. I have a retirement policy which I took in 2005 and it’s supposed to mature in 2027. Will I be able to surrender it and what will be the consequences. I’m unemployed and I need cash to pay my bond and to pay for my children’s school fees.

    1. Yes, you will be paid out the entire benefit. There may be tax consequences on any gains. Check with an accountant to be certain. The other obvious consequence is your beneficiaries will not receive the death benefit any longer. If the cash stays in your estate you can pass it to them on passing through your estate.

  18. can I surrender funeral cover?

  19. Hi, how much do i get after i surrender my life insurance policy? i only got to pay 1 year of my insurance and because of some financial problem i cant pay it anymore.. How much will i get if i fully surrender my insurance policy?

    1. If you have a permanent policy, you will receive the cash surrender value of your policy. You can contact your insurance company to obtain this figure. It depends on many factors such as policy size, cash paid so far, surrender charges, policy type, age, dividend options are chosen, market performance, and many more. There is not a way to estimate this based on the info you provided.

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