when you surrender a policy you receive whatever you paid in premiums back tax free if you receive more than you paid in total premiums you owe income tax on your earnings 1
cash surrender value vs cash valuein the early years of a policy life insurance companies can deduct fees upon cash surrender what you receive for your cash surrender value could be less than your current cash value balance after subtracting these fees 1the surrender charge can start as high as 10 to 35 of your policy cash value 2 if your policy has a surrender charge it goes down over time most policies end the surrender charge after 10 to 15 years at this point your cash surrender value equals your cash value 1the cash surrender value of a life insurance policy is equal to the total accumulated cash value minus prior withdrawals outstanding loans and surrender charges 