What is meant by the term "surrender value" in a life insurance policy?

The term "surrender value" in a life insurance policy refers to the amount a policyholder receives if they decide to terminate or "surrender" their permanent life policy before its maturity or before the insured event occurs (usually death). This value is essentially the cash value that has built up in the policy over time, minus any applicable surrender charges and outstanding loans against the policy.

Permanent life insurance policies, such as whole life or universal life, accumulate cash value as part of their design, allowing policyholders to access this money while still maintaining life insurance coverage. The surrender value can be significantly less than the death benefit of the policy and will typically increase over time as more premiums are paid and as the policy matures.

Understanding surrender value is crucial for policyholders, especially if they consider discontinuing their policy. The other choices refer to different concepts that do not accurately reflect what surrender value entails. For instance, the total cash value at retirement, the total premiums paid, and the value increase after a specific time don't specifically address the financial benefit received upon surrendering a policy.