Legal Definitions - CSV

CSV stands for Cash Surrender Value.

The Cash Surrender Value (CSV) is the amount of money a policyholder is entitled to receive if they voluntarily terminate a permanent life insurance policy (such as whole life or universal life) before the insured person's death or the policy's maturity. This value represents the savings component that has accumulated within the policy over time, minus any applicable surrender charges or outstanding policy loans. It is a guaranteed amount that grows over the life of the policy and can be accessed by the policyholder.

• Example 1: Accessing Funds for an Emergency

  Maria has held a whole life insurance policy for 20 years, and it has accumulated a significant cash value. When her roof is severely damaged in a storm and her homeowner's insurance doesn't cover the full cost of repairs, Maria decides to surrender her life insurance policy to cover the unexpected expense. The lump sum payment she receives from the insurance company after canceling the policy is its Cash Surrender Value, which she then uses to pay for the roof repairs.

• Example 2: Using a Policy as Loan Collateral

  David, a small business owner, needs a short-term loan to purchase new equipment. He has a universal life insurance policy that has built up substantial value over 15 years. A bank agrees to lend him the money, using the Cash Surrender Value of his universal life policy as collateral. This arrangement provides security for the bank, as they can claim the CSV if David defaults on the loan, demonstrating how the accumulated value can be a tangible asset.

• Example 3: Evaluating a Policy Exchange

  Sarah is considering exchanging her existing whole life insurance policy for a new, more flexible universal life policy from a different insurer. Before making the switch, her financial advisor helps her determine the Cash Surrender Value of her current policy. This figure is crucial because it represents the amount she would receive upon surrendering the old policy, which she could then use to fund the new policy through a tax-free 1035 exchange, or simply take as a cash payout. Knowing the CSV allows her to compare the financial implications of keeping her current policy versus acquiring a new one.