« Back February 10, 2021 Insurance is a highly-regulated industryWe can credit our favorite kite-flying forefather, Benjamin Franklin, for playing a major role in founding the life insurance industry in the United States in the 1700s1 but it was not until the mid-19th century that the regulatory framework for the industry was created.2 Insurance regulations were developed to protect consumers in three main areas: the financial solvency of insurance companies, the products they sell, and market conduct and prevention of unfair trade practices.2 Almost all regulations that life insurance companies must follow are state laws rather than federal laws. Each state has a state insurance department, which means that a life insurance company that operates in each state must adhere to the governing laws of every state they operate in.3 The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories. NAIC acts as a forum for the creation of model laws and regulations, but generally, each state decides whether to pass these model laws and regulations. States are allowed to make changes during the enactment process but the model laws and regulations are widely adopted.2 Extenuating Circumstances
If the policyholder doesn’t select an option, the insurance company will have a default option contained in the policy’s language. The Extended Term Option is often the insurance company’s default option. There are other non-forfeiture options, but not all insurance companies make these options available.
If you find yourself in a situation where you cannot or no longer wish to pay the premiums on a life insurance policy with a cash value, using one of the non-forfeiture options may be a good choice for you. Keep in mind that non-forfeiture options may adversely impact some coverage; for example, reducing the face amount or canceling the policy completely. Your insurance agent can help you weigh the pros and cons so you can decide what is best for you.
Categories: insurance, life insurance « Back What is cash surrender value of life insurance policy?Cash surrender value is money an insurance company pays to a policyholder or an annuity contract owner if their policy is voluntarily terminated before maturity or an insured event occurs. This cash value is the savings component of most permanent life insurance policies, particularly whole life insurance policies.
What type of asset is cash surrender value of life insurance?The cash surrender value of a life insurance policy is an asset a company can control, so it should be recorded on its balance sheet. A future death benefit is an economic benefit—one the company can't control, so it should not be recorded as an asset. Understanding the type of life insurance is critical.
What is the process of surrender in life insurance policy?A policy surrender request must be filled up and submitted to the insurance company. The original policy document, a cancelled cheque and self-attested copy of KYC documents need to be enclosed with the application. Reason for surrender may also have to be stated in the form.
Is cash surrender value of life insurance a liability?If there is a loan on a life-insurance policy, we consider it permissible either to show the cash surrender value as a current asset and any loan against it as a current liability or to show the cash surrender value below the current asset sec tion with the loan as a deduction.
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