What does the term “surrender value” refer to?

The term "surrender value" specifically refers to the amount a policyholder will receive if they decide to terminate their life insurance policy before its designated maturity or the insured's death. This financial metric is crucial for policyholders who may need to liquidate their policy for cash or who are considering options outside of keeping the policy active.

When a life insurance policy accumulates cash value, which typically happens in whole life and universal life policies, the surrender value represents the cash available to the policyholder if they choose to cancel the coverage. The policyholder might not receive the full cash value when surrendering the policy, as there could be surrender charges or fees involved, but it reflects the value that the policy has built up over time.

The other options do not accurately represent the meaning of "surrender value." Total premiums paid would indicate the total amount spent by the policyholder but does not account for any value that has been accrued. The cash value after a specific period could represent a portion of the total value but not the complete definition of surrender value, as the surrender value is applicable at any point before maturity. Finally, the projected payout upon maturity refers to the death benefit that beneficiaries would receive, which differs significantly from the surrender value concept.