Are Life Insurance Companies Offering Cash Surrender?

Many people never thought that life insurance organizations would advertise policy surrenders rather than solely focus on acquiring new policies. For over twenty years, the majority of life insurance carriers opposed life settlement companies. Even some of these organizations denied their agents from seeking life settlement options for their customers. However, now some of the most well-known life insurance businesses are giving certain policyholders a better cash surrender value, which is similar to the advantages of life insurance settlements.

These efforts are designed to encourage people to consider surrendering their life insurance policies. However, these different proposals are very similar to life insurance settlement options, as a few states have banned these transactions due to various insurance regulations in each state. Additionally, this practice may even be discriminatory because life insurance companies are treating each person differently.

Life Settlement and Cash Surrender Value of Life Insurance

These different offers only further validate the initial focus of the life settlement industry, which is that a life insurance policy is usually much more valuable than the cash surrender value. Of course, life insurance companies aren’t simply giving these offers due to their generosity, as they are trying to limit their expenses on policies that were priced too low. The ability to get rid of these life insurance policies may cost the insurers additional money in the present, but it will save them a significant sum of money in the future.

Additional Things to Consider About a Life Insurance Settlement

Understanding your life insurance settlement options is important for policyholders. Many insurers feel that these life insurance policies are too great of a deal for the client, as they aren’t priced high enough, which makes them a lot less profitable. On the other hand, providing an additional incentive with an enhanced cash surrender value offers instant benefits for the policyholder, but the main issue is if life insurance is still needed for the individual.

In other words, the greater cash surrender value of the life insurance policy is usually a lot less valuable compared to the death benefit. You will also be forced to pay income taxes for any gains from the cash surrender value. Sometimes a policy replacement can be a viable choice for individuals in good health that can qualify for new life insurance coverage. However, the enhanced cash value may not be worth it financially due to the favorable costs of the existing policy and the likely more expensive replacement policy. On the other hand, any policyholders with health problems that don’t want their coverage should consider a life settlement instead of an enhanced cash value offer. Many times the life settlement offer would be much bigger compared to the enhanced cash surrender value.

Final Thoughts

Choosing to partner with professional advisors is a good idea if you receive any one of these offers or if you are surrendering a policy. These professional advisors will work with you in evaluating all of your different options to help you make a decision that’s in your best interests. An agent can also work with you in comparing whole life insurance and term life insurance options. Taking the time to compare your choices is always a smart decision, whether you have any questions about the cash surrender value of life insurance, term life insurance, whole life insurance, or a life insurance settlement.

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