3.11.1 Cash Surrender Value
The policyowner may want to relinquish (or give up) the value of the policy in exchange for cash. For the first two to three years there may not be a cash surrender value. However, as time passes and premiums are paid and interest is earned, the cash surrender value increases. Any outstanding loans would be deducted from the surrender value and the cash is usually paid in one lump sum. Surrendering a policy for cash, of course, terminates the policy.
So, if Dee has a policy with a stated cash value of $5,000 and still owes $500 (including interest) on a previous loan from the cash value, the insurance company would give her a total of $4,500 ($5,000 minus $500) on the cash surrender value option.
Most states also permit a delayed payment provision in which the insurer can postpone payment for a period of six months; however, this provision is rarely used.