Key takeaways 

  • Cash surrender value is the money you receive if you end a permanent life insurance policy: your cash value minus any surrender charges and outstanding loans. 

  • Only permanent policies, such as whole life and universal life, build cash value. Term life insurance doesn’t, so it has no cash surrender value. 

  • Surrender charges are usually highest in a policy’s early years and typically phase out after 10 to 15 years, so your surrender value moves closer to your cash value over time. 

  • If you receive more than your cost basis (generally the premiums you’ve paid), the difference is generally taxable as ordinary income. 

  • Surrendering ends your coverage, but a policy loan, a withdrawal, or using your cash value for premiums can give you access to cash while keeping your protection in place. 

  • A financial advisor can help you compare your options based on your goals and your specific policy. 

One of the most attractive reasons to purchase permanent life insurance, aside from the death benefit protection, is that it can also be a wealth-building asset. These policies have a cash value that grows slowly in the first years you own the policy but accelerates as funds compound with tax-deferred interest.1 Funds in the cash value can be accessed in various ways — for example, in the form of policy loans or to help pay premiums later.2 But what if you decide you want to cash out — or “surrender” — your life insurance policy altogether? How much is your policy’s life insurance cash surrender value actually worth? This article will help answer that question and explain: 

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What is cash surrender value? How does it work? 

Cash surrender value is the actual amount of money you will receive if you choose to terminate a permanent life insurance policy before its maturity date, or before you die. That value differs from your life insurance policy's cash value component, which is the total sum compiled in your policy's cash account. 

Your cash surrender value is the amount of cash you've built minus any surrender charges or fees and any outstanding policy loans and loan interest. Those charges diminish with time, so the longer you've had your policy, the closer the cash surrender value will be to the cash value. Most policies charge surrender fees for roughly the first 10 to 15 years, with the highest fees typically charged in the first year.3 

In most cases, your policy’s cash surrender value will be paid in a lump sum. Depending on your policy, however, you may receive periodic payments over time. To determine what that value is and how it is paid out, you have to look at your policy contract, which should spell out all those details. 

Remember that cash value in whole and universal life insurance policies grows tax-deferred. As long as the money remains in the policy, it's not taxed, so it can grow faster. However, once cash value is withdrawn from the policy (or the policy is surrendered), you may owe taxes if you receive more in surrender value than the sum of premiums you paid into the policy. 

Which types of policies have cash surrender value?

Life insurance comes in two primary forms: term life and permanent life. Term life insurance is typically less expensive, but it only lasts for a limited period — the policy term is typically 10 or 20 years. Term policies don’t build cash value, so there’s no cash surrender value. 

Unlike term life insurance, permanent life insurance builds cash value and is available in several forms. The most popular types of permanent insurance are whole life and universal life. 

Whole life insurance has a guaranteed premium and a guaranteed cash value.4 With whole life, you pay the same premium each month for the life of the policy, and your cash value grows at a rate guaranteed by your insurance company. If you get the policy from a mutual company (like Guardian), you may also earn dividends, which can help the cash value grow beyond the guaranteed value.5 

Universal life insurance typically costs less than whole life but does not provide the same guarantees.6 Both the cash value and cash surrender value amount are based on current interest rates, which may go up or down throughout the life of the policy. Universal life policies also let you raise or lower your premium payments within a certain limit — but if you pay minimal premiums for too long, it can impact the cash account and death benefit, and may even cause your policy to lapse.7 There are also several variations on this type of policy. For example, a variable universal life policy lets you allocate the cash value into investment options called “subaccounts.”8 This provides the potential for greater cash value growth and the risk of losses if your investments go down in value. 

How to calculate your cash surrender value amount.

Your whole life cash surrender value is the guaranteed cash value shown on your policy plus the value of any dividends accumulated in the policy, minus any outstanding loans and loan interest. 

Your universal life cash surrender value is the current cash value of your policy less any surrender charges. And, if you’ve had the policy for 10 to 15 years, the surrender fees typically go away. 

For example, say you’ve paid $20,000 in premiums and your policy’s cash value is $25,000. If a $1,000 surrender charge applies, your cash surrender value would be $24,000 — and the $4,000 above what you paid in would generally be taxable income.9 

In either case, you can contact your financial advisor or life insurance company for current cash surrender value. Your policy’s surrender value could well be higher than the amount paid in, and you may owe taxes on the difference. The taxable amount is generally what you receive above your cost basis in the policy — typically the premiums you’ve paid, minus any tax-free dividends or withdrawals you’ve received — and your insurer reports it on Form 1099-R.10 That gain is generally taxed as ordinary income.11 A tax professional can help you understand how this applies to your situation. 

Is surrendering your policy an option you should consider?

There are two downsides to surrendering your life insurance policy. First, you lose your life insurance protection. Second, you may have to pay fees and lose some of your cash value. That’s one reason many policyholders tap their cash value while keeping their coverage in place. In Guardian research among high-net-worth individuals (those with $2 million or more in investible assets), whole life policyholders reported using their policies for retirement funds (25%), a home purchase (25%), emergencies (25%), and family building (21%).12 Fortunately, if you want to access your cash value — or find that you can no longer afford the premiums — there are other choices you can make: 

  • Withdrawal: In most situations, you can take a cash withdrawal from your permanent life policy, and that money will not be subject to income taxes if it’s less than the amount paid into the policy. However, there are potential disadvantages: First, your death benefit will likely be reduced, depending on your cash value. Also, that reduction may be greater than the amount withdrawn, depending on the specific terms of your policy. 

  • Loans: You can typically borrow money against your policy, although the amount varies. The money does not come from your policy but rather from the insurer, which uses your policy as collateral. Life insurance loans include interest payments, but it's typically a lower rate than you'd get with personal loans or even a home equity loan. No loan application or credit check is required, and your credit rating does not impact your interest rate. You can choose not to repay, but the outstanding loan balance will typically be deducted from your death benefit. A policy loan can be an option to consider if you need cash but want to keep the full death benefit in force after repaying the loan amount. Keep in mind that if a policy lapses or is surrendered with a loan outstanding, part of that loan may be taxable.13 

  • Use cash value to pay your life insurance premiums: You can typically use the money in your cash value to pay part or all of your policy premiums, making it easier to keep your coverage in place. This is a popular option for older policyholders who want to use retirement income for living expenses but still want to keep life insurance coverage in place. However, if the policy's cash value becomes too low, your policy may lapse. 

  • Sell the policy: In a life settlement, you sell your policy to a third party, generally for more than its cash surrender value but less than its death benefit. Transaction costs can be high, and the payment may be taxable, so review any offer carefully.14 

  • Keep reduced coverage: You may be able to use your cash value for a smaller paid-up policy that requires no further premiums, or for term coverage at your original death benefit for a limited time.15 

  • Exchange the policy: A 1035 exchange may let you trade your policy for an annuity without owing taxes on the exchange. 

Cash value can also act as a reserve when markets are down. “The cash value in a whole life policy lends itself to being a volatility buffer. It’s a source of income or capital during bad markets,” says Ashvin Chheda, Financial Advisor with Guardian.16 Talk to your financial advisor or life insurance company for the specifics of how withdrawals, loans, premium payment, and surrender work for your cash value life insurance policy. Before you decide, it can help to ask yourself a few questions: 

  • Do your loved ones still rely on the death benefit? 

  • Are you past your policy’s surrender-charge period? 

  • Would replacing your coverage cost more at your current age or health? 

  • How much of your surrender value would be taxable? 

Do you need a life policy with a cash surrender value?

As with any other financial services product, the decision to get a policy with cash value — and cash surrender value — comes down to your life situation and goals. If you want life insurance protection that lasts your entire life, then a permanent life insurance policy with a cash surrender value from an experienced provider can be a valuable choice for your needs. If you’d like to learn more, contact Guardian to find a financial advisor who will take the time to learn about your unique situation, listen to your concerns, and clearly explain the different insurance options that best fit your needs and your budget — from a company that’s been helping protect families for over 160 years. 

“Too often, people view life insurance as a cost rather than a source of value. At its core, it’s a way to protect a family’s future and create confidence in an uncertain world,” says Andy Gordon, Head of Individual Life Insurance at Guardian.17 

FAQs

Frequently asked questions about cash surrender value

Your whole life cash surrender value is the guaranteed cash value shown on your policy plus the value of any dividends accumulated in the policy, minus any outstanding loans and loan interest. 

Your universal life cash surrender value is the current cash value of your policy less any surrender charges. And, if you’ve had the policy for 10 to 15 years, the surrender fees typically go away. 

But in either case, you can contact your life insurance company for your current surrender value. Also, if your cash surrender value is higher than the amount you’ve paid into your policy, you will likely have to pay taxes on the difference. 

Cash value is the money that builds up in your permanent policy over time, including any interest or dividends. Cash surrender value is what you actually receive if you end the policy: your cash value minus any surrender charges and outstanding loans. 

It can be. If your cash surrender value is higher than your cost basis — generally the premiums you’ve paid, minus any tax-free dividends or withdrawals — the difference is generally taxed as ordinary income and reported on Form 1099-R. A tax professional can help you understand how this applies to you. 

If you have a permanent policy with cash value, yes. You can surrender the policy for its cash surrender value, which ends your coverage, or you may be able to access cash while keeping your coverage through a policy loan or withdrawal. Learn more about how to withdraw cash from your life insurance policy. 

Generally, no. Term life insurance doesn’t build cash value, so there’s nothing to cash out. If your term policy is nearing the end of its term, you may have other options. 

This article is for informational purposes only. Guardian may not offer all products discussed. Please consult with a financial advisor to understand what life insurance products are available for sale. 

1 Some whole life policies do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial advisor and refer to your individual whole life policy illustration for more information. 

Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. 

2 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59½, any taxable withdrawal may also be subject to a 10% federal tax penalty. 

3  Hartill, Robin and Rosenberg, Alex, What Is the Cash Surrender Value of Life Insurance?, NerdWallet, September 21, 2026 

4 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims-paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values. 

5 Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors. 

6 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company's board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium. 

7 Universal life insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guarantee requirements are not met the policy will most likely lapse. 

8 A Variable Universal Life (VUL) policy is considered both life insurance and a security and is sold with a prospectus. Premium and death benefit types are flexible. Its crediting rate is based on the performance of the underlying investment options provided in the policy. There is no guaranteed interest rate. This type of policy may lapse due to low or negative performance of the underlying investment options, inadequate funding, and increasing cost of insurance rates. See your policy prospectus for more information. 

9 ibid. 

10 Publication 525 (2025), Taxable and Nontaxable Income, Internal Revenue Service, 2025 

11 ibid. 

12 Whole Life for Whole Wealth, Guardian, 2026

13 What You Should Know About Life Settlements, FINRA, July 31, 2023

14 Fitzpatrick, Mark, What Is Extended Term Insurance? 2026 Guide, MoneyGeek, September 11, 2026

15 ibid. 

“Financial advisor”/“advisor” is used generally to describe insurance/annuity and investment sales and advisory professionals who may hold varied licensing as insurance agents, registered representatives of broker-dealers, and investment advisory representatives (IAR) of registered investment advisors, respectively. Only those representatives who use advisor in their title or otherwise disclose their status and meet the necessary licensing or registration requirements provide investment advisory services. 

Guardian® is a registered trademark of The Guardian Life Insurance Company of America.