Policy Surrender
A planning technique that terminates a life insurance policy early, allowing the policy owner to exit coverage. For a permanent policy, the cash value is received, subject to surrender fees and tax liabilities.
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A policy surrender refers to the voluntary cancellation of an insurance policy and is generally considered a last resort. If a repurposing or exit strategy does not align with your goals, policy surrender is always an option. For permanent policies, the policy owner receives the cash value within the policy, minus any surrender fees or outstanding loans. It's important to note that any surrender value exceeding the basis is subject to taxation as either regular income or capital gains, depending on the policy owner (individual, trust, company, etc.). For term policies, the policy owner generally receives any unused premium that has been paid into the policy. Once a policy is surrendered, life insurance coverage terminates, and beneficiaries will not receive a death benefit at your passing.