There are a lot of good reasons to surrender a policy, including unaffordable premiums or not needing insurance coverage anymore. For example, you take out a whole life insurance policy. Twenty years later, you unexpectedly lose your job. You may want to surrender your life insurance policy because you can no longer afford the premiums.
Other valid reasons for surrendering a life insurance policy include no longer having dependents that rely on you financially and switching to a permanent life insurance policy that offers better rates or coverage.
You’ll likely want to wait 10 to 15 years after buying a policy to cash it out. That length of time gives you enough time to build up significant cash value. If you cash out your policy, the length of time you own it will help lower the cost of surrender or early cancellation fees you might pay.
The biggest benefit of surrendering a life insurance policy is receiving a lump sum payout of the surrender value. You can use this money as you like, whether you need to pay off debt or want to put it into savings. Another benefit is being able to use the money you would have put toward the premium for something else that means more to you.
Many people think cashing out a life insurance policy and surrendering it are the same thing, but they’re not. Cashing out a life insurance policy can refer to accessing cash value savings. You can do this through a withdrawal or a policy loan, which gets you access to your cash value savings without surrendering the policy.
