Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
The cash surrender value of a whole life insurance policy is generally determined by:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
When a whole life policy is surrendered, the insurer pays the net cash surrender value: the cash value that has accumulated in the policy, reduced by any surrender charges applied in the early policy years and by any outstanding policy loan balance. The face amount is the death benefit, not the surrender value. The net cash value can be taken in cash or used under the nonforfeiture options in objective LIFE-II.E.8.
Why the other options are wrong
- B) Total premiums paid are not returned; the cash value is a reserve-based accumulation, not a premium refund.
- C) The face amount is the amount payable at death, not the surrender value.
- D) The surrender value is not computed by subtracting premiums from the death benefit.
Memory hook
Surrender check = cash value minus surrender charge minus loan. Face amount is not in the envelope.