Cash Value vs Surrender Fee

[scagnt83]

I have a 250K UL $2K Cash Value and $7K Surrender Fee. I can not afford to pay the premium any further due to job loss during COVID. I plan on just letting the policy lapse.

Can I assume I will just lose the $2K cash value, and nothing else on the surrender fees?

Please advise.

Frank.

If you stop paying premiums, the policy will use the Cash Value to pay premiums until it runs out.

If your "Surrender Value" is $2k, that is money that is accessible to you right now to withdraw. You could cancel the policy and receive the $2k back as cash.

You say that you have a $7k "Surrender Fee".... and $2k in Cash Value.... I think you mean $2k in "Surrender Value".... and the total Cash Value in the policy is $9k.

If that is correct, you have $9k to cover premiums until the policy lapses.

You can also look at dropping any riders that are on the policy, such as Waiver of Premium, etc. That will help reduce expenses some.

 

[Allen Trent]

I have never seen a UL that waives surrender charges on a face reduction, while still in the surrender period. You have?

I have only seen it waived for internal transfers to new products. And even then most will not.

If the policy is out of surrender, then you can reduce without issue. But within the surrender period, you are looking at a face reduction in every policy Ive ever worked with in that situation.

The primary carrier I have worked for for 25 years doesnt have a single UL product version that charges the Surrender charge on a face reduction nor even on a partial withdrawal. $25 fee to take a partial WD. Surrender charge is only charged on actual full product surrender/lapse when not a net positive surrender value. While I know that is extremely rare, I have read a few other contracts that also permitted it. The product also allows the surrender charge to be waived if the person annuitizes the CV into a minimum 5 year payout if age 55+. Lastly, as a non-contractual current offer, the UL waives surrender charge if the UL is converted to a paid up WL (like a reduced paid up WL). While I know most of this is extremely rare, I have read a few other contracts that also permitted the face reduction without surrender charge.

I believe a lot of other products with higher commissions need to have that face reduction partial surrender charge to discourage reps from selling contracts with 100%+ commission rates that wont stay inforce or write the face too high to max 1st year comp on target premium & then drop the face the following year.

That is why I was suggesting he ask about the inforce illustration.

 

[Lloyds of Lubbock]

A face amount reduction may cause a mec.
Why dont you get some inforces, showing a face reduction an one not paying premium to see how long it lasts?
If your current situation is not permanent maybe skipping a year or two, then continuing may be a viable option.
It would also be somewhat helpful to kinow how old your policy is