In insurance terms, what does cash surrender refer to?

Cash surrender refers to the process of canceling a life insurance policy prior to its maturity or the death of the insured, allowing the policyholder to receive a cash payout based on the policy's cash value. This is particularly relevant for whole life or universal life insurance, where the policy accumulates cash value over time.

When a policyholder chooses to surrender their policy for cash, they effectively terminate the coverage and forfeit any death benefit that would have been payable to beneficiaries. The amount received upon surrender is typically equal to the accumulated cash value minus any applicable fees or outstanding loans taken against the policy.

The other choices, although related to insurance claims and payouts, do not accurately represent the concept of cash surrender. Immediate or delayed payments for claims pertain to the claims process for events covered by an active policy, while reduction of premium payments involves modifying how much the policyholder pays, rather than cashing out their policy.