What factor typically reduces the cash surrender value when a policy is surrendered?

• A. Underwriting fees.
• B. Paid-up additions.
• C. Surrender charges.
• D. Death benefit.

Answer: (C)

Surrender charges are the fees taken out when you cancel a policy during the period when those charges apply. They’re built into many policies to recover the insurer’s initial costs, like commissions and issue expenses. When you surrender, these charges are deducted from the policy’s cash value, reducing the net amount you receive. Over time the charges typically lessen or disappear, so the cash value may be higher later in the policy. Paid-up additions would actually increase cash value, underwriting fees are upfront costs not specifically deducted at surrender, and the death benefit is a separate amount paid on death, not the surrender value. So the factor that reduces the cash surrender value upon surrender is the surrender charges.