What Is The Surrender Value Of A Life Insurance Policy? 
Only permanent life insurance policies have a surrender value . The feature of permanent policies that allows this is that more premium is collected than necessary to purchase insurance for one year . The remainder becomes a reserve . That reserve reduces the companys need to purchase insurance in later years . The government does not tax the reserve except under unusual conditions . The company guarantees that reserve in the whole life policy . At any time the company will exchange the reserve for the promise to pay the death benefit . They will also allow you to reduce the death benefit and take a loan . There are other options but they are all based on the surrender value . The surrender value is the reserve . 