What is Net Surrender Value (NSV)?

The Net Surrender Value, or NSV, is the specific sum of money a life insurance company will award to a policy holder, in the event that there is a voluntary termination of a life insurance policy before it reaches maturity or the death of the policyholder happens.

It is important to note that the net cash surrender value is less than the cash value in the policy in that this is the amount of funds that the life insurance policy holder will receive upon the policy’s surrender, or cancellation.

In other words, the net surrender value is the amount that the policy holder will receive as a refund if he or she cancels an in-force and active permanent life insurance policy and surrenders – or gives back – the policy to the insurance carrier before the policy “matures” or before the insured passes away.

Once the policy holder receives back the net cash surrender value from the insurance company, this will essentially release the insurer from any type of further obligations of paying out a death claim.

Oftentimes, if the policy holder cancels or surrenders a permanent life insurance policy within the first few years that it is in force, there will be little or no cash value in the life insurance policy. This is because most or all of the premium dollars go towards paying mortality costs, as well as towards other administrative expenses during the first few years.

It is typically not until after a permanent life insurance policy – especially a whole life policy – has been in force for several years that it begins to build up a significant amount of cash value in the plan. In the early years of the policy, the policy holder may also be required to pay a surrender penalty to the insurance carrier upon cancelling the life insurance policy.