Which statement best describes surrender of a life insurance policy?

• A. Voluntarily surrendering the policy in exchange for its cash surrender value.
• B. Transferring ownership to a beneficiary without surrender.
• C. Extending the policy term using the cash value.
• D. Converting to a MEC automatically.

Answer: (A)

Surrender means the policyowner voluntarily terminates the life insurance contract and takes the policy’s cash surrender value. The cash surrender value is the policy’s accumulated cash value minus any surrender charges and any outstanding loans with interest. When you surrender, the policy ends and there is no longer any death benefit unless you purchase a new policy. This differs from merely transferring ownership (which changes who holds the policy but keeps coverage), or using the cash value to extend coverage as term insurance (a nonforfeiture option that keeps the policy in force in a different form). A MEC is a tax status that can result from certain funding patterns and is not an automatic surrender.