The cash value of an insurance contract, also called the cash surrender value or surrender value, is the cash amount offered to the policyowner by the issuing life carrier upon cancellation of the contract. This term is normally used with a life insurance or life annuity contract.
To receive the cash value, the policyholder surrenders their rights to future benefits under the policy.
Cash values are usually associated with whole life insurance or endowment life insurance and other forms of permanent life insurance. The contract determines for each possible cancellation date the related cash value. If the investment of premiums is contractually made in an individual account, the cash value is the value of the investments in that account at any particular time minus a surrender charge. Such cash value credited to an individual account during the tenure of the policy keeps growing with every payment of premium. It also increments due to interest credited.
The policyholder may also be able to use the cash value as collateral on a loan.
The cash value will often be similar or even equal to the reserve to be held by the insurance company for the net obligations from the contract. As such, the amount is usually invested and earns investment income for the insurance company which is to some extent forwarded to policyholders of participating contracts.
Since often initial premiums are not invested but covering initial costs associated with selling the contract (up front or front-end fee), the amount available may be significantly lower than the sum of premiums paid for some time, initially even zero. Later, interest credited might compensate that initial loss.
The value of the investment is often subject to a surrender charge in determining the cash value. A surrender charge offsets the costs associated with selling the contract and allows these contracts to be sold with little or no up front fees. Surrender charges are imposed when a contract is cancelled within a set time frame. Any cancellation after that time frame are not subject to a surrender charge. Typically surrender charges decrease on an annual schedule until they disappear altogether.
Usage examples of "cash value".
If such a contract had specified a fifty-fifty split, then x would be equal to fifty percent of the cash value of the wreck times the one tenth of Epiphyte that the Dentist owns minus a few percent for taxes and other frictional effects of the real world.
If you have a sales record for the guns, or if you can demonstrate their commercial value, we will pay you the fair cash value for them.
All of these things were worth taking from a pure dollars-and-cents standpoint, but I've found that I tend to balance the cash value of an artifact against its likely sentimental value to its owner.
It proved that his first hand experience of the elaihim might indeed be of cash value in Chrystianaville.
With this as his leverage, by the year 1900 he owned three banks, four textile mills, numerous flour mills and sixteen other critical businesses with a cash value of more than twenty-seven million dollars.
They should have been willing to give her the full cash value of the house she couldn't accept.
Now, I was reading an article the other day on the cash value of an education to a boy.
Coupons are given a cash value in order to comply with laws in a few states that classify them with trading stamps.
Instead, he had become an accountant of sorts, and spent his life looking after a body of investments with a total cash value in the neighborhood of thirty trillion U.