Surrender Cost Index
What Does Surrender Cost Index Mean?
The surrender cost index is a metric that determines the cash surrender values of life insurance policies at specific future times, should the insured decide to surrender their policy for a cash payout. This useful index helps potential buyers compare cash-value life insurance plans and select the most suitable option.
Insuranceopedia Explains Surrender Cost Index
The surrender cost index, presented to potential buyers, displays the comparative costs of cash-value life insurance policies to assist in their decision-making process. Insurance companies use a complex formula to calculate it, but the basic method involves assuming that premiums and dividends accumulate over time at a specific annual interest rate. The accumulated dividends and the policy’s cash value at the end of the given period are then subtracted from the accumulated premiums. In simpler terms, it determines the difference between the total premium payments over a certain period and the policy’s projected cash value, ultimately revealing the actual cost of the policy.
