What typically happens if a policyholder chooses to cash in their permanent life insurance?

What typically happens if a policyholder chooses to cash in their permanent life insurance?

• A. The policyholder receives face value immediately
• B. The policy is terminated and cash surrender value is paid
• C. The policyholder is given a grace period for repayment
• D. The policy continues with reduced death benefits

Answer: (B)

When a policyholder decides to cash in their permanent life insurance policy, they are essentially opting for the cash surrender value of the policy. This action results in the termination of the policy, meaning that the policyholder will no longer have coverage under that policy. The cash surrender value is the amount of money that the insurer will pay the policyholder, which is usually less than the total face value of the policy. This option provides the policyholder with immediate access to a portion of the funds accumulated in the policy over time, which can be beneficial if they need cash for other financial obligations. In situations where a policyholder chooses to cash in their policy, they do not receive the face value immediately, nor is there a grace period for repayment. The grace period applies to premium payments that are overdue, not to cash surrender. Additionally, once the policy is cashed, there is no continuation of the policy with reduced death benefits; instead, the policy is completely terminated upon withdrawal of the cash surrender value. This key aspect underscores the nature of permanent life insurance, which maintains a cash component alongside providing long-term coverage.

When a policyholder decides to cash in their permanent life insurance policy, they are essentially opting for the cash surrender value of the policy. This action results in the termination of the policy, meaning that the policyholder will no longer have coverage under that policy. The cash surrender value is the amount of money that the insurer will pay the policyholder, which is usually less than the total face value of the policy. This option provides the policyholder with immediate access to a portion of the funds accumulated in the policy over time, which can be beneficial if they need cash for other financial obligations.

In situations where a policyholder chooses to cash in their policy, they do not receive the face value immediately, nor is there a grace period for repayment. The grace period applies to premium payments that are overdue, not to cash surrender. Additionally, once the policy is cashed, there is no continuation of the policy with reduced death benefits; instead, the policy is completely terminated upon withdrawal of the cash surrender value. This key aspect underscores the nature of permanent life insurance, which maintains a cash component alongside providing long-term coverage.