How to Surrender a Variable Universal Life Policy

Variable universal life is a type of insurance policy known as "permanent insurance." This means that as long as the premiums are paid in accordance with the contract terms, the policy will pay benefits upon the death of the insured, regardless of how long that person lives. Variable universal life can also be used as a supplemental savings plan because it allows investors to invest in mutual funds in a tax-deferred structure. Surrendering the policy requires you to understand the applicable fees and taxes.

Contact the insurance agent who maintains your policy or a customer service representative at the insurance company.

Request an account of all premiums paid into the policy as well as the existing cash value. Add all the premiums together and subtract this total from the cash value. This is the amount that will be added to your income taxes. The premiums are not taxed since they are after-tax dollars.

Review whether you have completed the contract terms for the surrender period. The surrender period is part of any variable whole life policy and requires that you maintain the account or pay a penalty for withdrawal. A variable whole life policy may have a surrender period extending out as far as 15 years and starting at a 15% surrender charge, dropping a percentage each year.

Calculate any surrender charges. If you have a $100,000 cash value with a 2% surrender charge, you will have $2,000 taken from the account.

Obtain a surrender form. Fill it out and sign it. Make a copy of the form and your policy for your records.

Submit the surrender form and policy to the insurance company. It should take approximately 10 days to receive the check, minus any surrender charges and taxes you chose to have withheld.


  • When speaking with the insurance agent, ask to have all assets moved to cash if you are concerned about major fluctuations in the cash value during the time between submitting the form and the account's liquidation.


  • If your cash value is less than your premium payments, you will not be able to take a loss on the investment. This is the rule for a tax-sheltered structure; the gains are treated as income, and the losses are negated.