A surrender is a full cancellation of a life insurance policy.  You are allowed to surrender your policy at any time.  A surrender does not affect your credit score, and a surrender will not affect your ability to get a new life insurance policy in the future (but changes in health can).  There may be fees associated with your surrender, these are known as surrender charges.  These are taken from the cash value (if any).  A term life insurance policy does not have any surrender fees.

Sometimes after owning life insurance for a number of years, people have changes in their lives.  Sometimes people used to have 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 life insurance coverage.  The good news 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 gets to access 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.

Reasons For Surrender

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it does not merely cease premium payments, it also releases all the saved value to the client (assuming they have not withdrawn or loaned it from the policy already).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.

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.

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 the better rating.  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 by 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.

Tax Consequences Of Surrender

Generally speaking, any 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.

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 in 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.


  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.

  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. 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.

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