Business Glossary

process in which the policyholder surrenders the policy when: (1) cash proceeds can be invested elsewhere at a higher return than that being earned on the cash value within the policy; and (2) economic recession or depression exists and the cash is required to meet other financial obligations. If the policyholder exercises the cash surrender value option during these economic circumstances, the company may have to sell assets at a "fire sale" and will have fewer funds to invest at advantageous rates of return.