What Is the Surrender Value of an Annuity?


Quick Answer

An annuity's surrender value pertains to the net cash value received by a policyholder who decides for the early cancellation of an insurance investment. The surrender value is also referred to as "cash value" or "policyholder's equity," states Investopedia.

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Full Answer

An annuity is a type of insurance plan that guarantees a future income to an investor once the policy matures. This income can be in the form of a lump sum settlement or a stream of payments, notes CNN. In the event that the policyholder discontinues paying the premiums on the annuity or willingly terminates the contract, the insurance provider is obliged to pay the surrender value to the investor.

The surrender value constitutes the savings portion of most long-term life insurance policies. If the surrender value received by an annuitant is greater than the amount of premiums paid, the excess is considered to be taxable income, according to Bankrate.

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