Term Life Insurance Answers

ie.cash value,surrender charge,policy cash value and policy cash surrender value.what do these terms mean???????

Nathaniel

4 Responses to “can someone explain some of the terms used on a life insurance policy?”

1. mbrcatz17 Says:
   July 7th, 2008 at 1:36 AM

   Tom

   They are all DEFINED in your policy form.

2. littlepurplebugz Says:
   July 9th, 2008 at 12:51 PM

   Kristin

   for a life policy. usually for the first few years, there is no cash value to the policy as this is usually due to the cost of insurance charges which the insurer has to recoup. after a certain no. of years, there will be a cash value to the policy. meaning, should you decide to give up (surrender) your policy or take up a loan on the policy, you can do by referring to the benefit illustration. as the year goes by, the cash value increases. for surrender charges, they apply if you decide that you no longer want your policy.

3. Wendy S Says:
   July 10th, 2008 at 10:30 AM

   Jay

   Some types of life insurance have money build up in them - wheither it be through dividends that the insurance company pays based on the performance of the company’s investments, or whether it’s additional money you pay in premiums to go directly into the cash value - which grows tax-deferred (meaning you don’t have to pay income tax on the interest unless/until you take the money out of the policy).

   First I’ll give you basic definitions, then give you an example of how they work:

   Cash value - money that is sitting in the policy.
   Surrender charge - a charge from the insurance company if you cancel the policy withing a specified number of years - typically ten years. After ten years there is no penalty payable to the insurance company to cancel the policy.
   Policy cash value - the same as cash value.
   Surrender value - the cash value less the surrender charge.

   Let’s say your premium is $100 per month. Perhaps $15 will go for policy fees, $60 for the actual cost of the life insurance, and the balance goes into the cash value of the policy. You can use the cash value to reduce your premiums, to purchase additional life insurance or just allow it to accumulate inthe policy.

   Let’s say after 8 years and three days the policy has an accumulated value of $500 (I’m just throwing out round numbers - do not use this as a reference for what your policy should pay!). The insurance company may charge you a 20% surrender charge (again, just throwing a number here). That would make your surrender charge in this case $100 and the surrender value of the policy $500.

   If you waited two years - so now you own the policy for 10 years and three days - you would have no surrender charge so you would receive the entire cash value that your policy is worth on the day you cancel it. At that point, though, the policy proceeds may become taxable.

4. Truth is best option to trust Says:
   July 12th, 2008 at 9:20 AM

   Erin

   Cash value: it is the equity amount that is legally available to the policyowner when the policy is surrendered.

   Surrender charge: An insurance fee that is deducted from the cash value when you cancel the policy

   Policy cash surrender value is what you really going to get after you cancel the policy.

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