Various Optional Forms in Which Surrender Values Are Granted

Life-insurance policies almost invariably give the insured the option of taking the surrender value guaranteed to him in his contract in one of three forms. The values under each form, and the conditions under which they are granted, are stated fully in the contract. Moreover, the values allowed under the several options are usually equivalent to one another as measured by some standard. Briefly outlined, the options referred to are the following:

1. Settlement by receiving cash payment. Upon request, accompanied by a full surrender of the policy, the company will pay the then cash surrender value thereof, less any indebtedness to the company. By accepting this option the insured terminates all connection with the company as regards the policy in question.

2. Settlement by accepting paid-up extended term insurance. Under this option the face amount of the policy and any existing dividend additions, less any indebtedness to the company on account of the policy, will be extended as paid-up term insurance for such length of time from the date of default in the premium payment as the then surrender value will provide at the net single premium rate for the attained age of the insured according to a certain mortality table with interest at a stipulated rate. It is usually this value which is extended automatically upon the failure to pay a premium; while the other options are usually granted only upon request. At the expiration of the term, the policy, like any other ordinary term contract, will have no further value.

3. Settlement by accepting paid-up fractional insurance of the same kind as the original policy. Under this option such an amount of the original policy will be continued as paid-up insurance as the cash surrender value will provide at the net single premium rate for the attained age of the insured according to a given mortality table and an assumed rate of interest.

In addition to the above customary options there are occasional instances where the policy offers the privilege of using the surrender value for the purchase of a life annuity, a temporary life annuity, or a temporary annuity certain. Many policies also provide that upon the request of the insured, made prior to default in premium payment, the premium or premiums thereafter falling due during the time such request shall remain unrevoked, will be advanced as a loan against .the policy at a stipulated rate of interest, provided the then cash surrender value shall be sufficient to cover the loan. Under this plan any premium loan may be repaid at any time.