If the owner of a life insurance policy dies and the insured is still alive but the policy hasn’t matured, if the insured wanted to cash out will he/she only be getting the cash out value?

  1. 5082 POINTS
    J Paul Wilson CFP, CHFC
    Certified Financial Planner, JPW Insurance Retirement Investments, Halifax, Nova Scotia, Canada
    In Canada, if the owner of the policy dies. what happens to the ownership of the policy depends on what the owner had put in place prior to his/her death. If the owner has named a contingent owner the the policy would transfer that way. If their was no contingent owner the the ownership would form part of the estate and be probated. Depending on who the policy ownership was transferred to there could be tax consequences.

    The cash value is what could be surrendered, the death benefit is not paid until the life insured's death. NOTE, once the policy has been issued the life insured has no claim on the policy or its cash value, unless the owner gave them the access.

    If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.

    If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
    Answered on April 21, 2014
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  2. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    Great question! The only way that a policy will pay out the whole face value is upon the insured's passing. Until that point, if you are wanting to surrender the policy, the most that you can get is the amount of the cash value, minus any surrender charges, loans or unpaid premiums. Contact the company to determine what that amount would be, and to get the appropriate paperwork. Before doing that though, it is always best to have an active policy for yourself so ensure that you do. Any more questions? Please feel free to contact me, I'm glad to help. Thanks for asking!
    Answered on April 21, 2014
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  3. 11498 POINTS
    Jason Goldenzweig
    Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
    If the policyowner dies before the insured, the ownership would go to the contingent owner (if one was desginated). If no contingent owner was designated, the policy ownership would then go into the estate and become an asset to the estate - from there it will have to go through the probate process. The Will (if one was left) would then designate who gets the asset. If the policyowner dies intestate (meaning they did not have a will), a judge would have to sign off on who gets the asset (the insurance policy in this case).

    Once new ownership has been established, the owner would then have the option to keep the policy going or cash it out (if applicable - term insurance does not build cash value, permanent insurance policies do). If cashed out, the amount received would be the cash value less any applicable surrender charges, outstanding loan balances, or interest on the loans.

    The insured does not have the ability to cash out the policy unless they were the policyowner.
    Answered on April 21, 2014
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  4. 325 POINTS
    Robert Bland, CLU
    Founder, CEO, LifeQuotes.com, Darien, IL
    The insured has no rights per se under a life insurance policy. Therefore, if the owner of a life insurance policy dies before the beneficiary, ownership of that life insurance policy reverts to the estate of the deceased owner.  It's that person that gets to decide what happens to the life policy.  Hope this helps.
    Answered on April 22, 2014
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  5. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    Unless there is a contingent owner, this policy will go to the decedent's estate. If the cash value of the policy is needed to pay off creditors or for administrative costs to settle the estate, or if it determined by the executor that cashing in the policy is in the best interest of all, then the cash value only is collected. Even if the policy is kept, the full face amount would not be collected until you died or your policy endowed (usually at age 100 for Whole Life). Thank you and I am sorry for your loss.
    Answered on December 4, 2014
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  6. 7479 POINTS
    Steve Kobrin
    President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
    I am sure that you can work with your attorney and find a way to surrender the policy.

    But here is a cautionary word: life insurance is for the beneficiary. Before you terminate the coverage, you need to be sure that the beneficiary will not need the money.

    Basically, has the need for the survivor benefit change so drastically that the coverage is no longer needed?
    Answered on May 5, 2015
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