Final answer:
When surrendering a life insurance policy, the insurance company might withhold the cash value payment for a period specified by the policy. It includes a cash value that accrues over time and can be borrowed against, which must be repaid with interest.
Step-by-step explanation:
When a policyowner surrenders a life insurance policy, the insurance company may withhold payment of the policy's cash values for a specified period, which varies by policy and company. This delay is partly because a cash-value (whole) life insurance policy not only provides a death benefit but also accumulates a cash value over time that the policyholder can use.
This cash value serves like an account which can be borrowed against based on the contributions that have been made to the policy. It is important to remember that any loan taken from the life insurance policy must be repaid with interest, otherwise, the policy's benefits can be reduced or the policy might lapse. Additionally, the financial protection provided by the insurance company involves managing the funds by lending to others or investing to ensure that all claims, running costs, and profits are adequately covered.
Therefore, the period that an insurance company can withhold cash value payments upon surrendering a policy typically depends on the terms set forth within the individual policy. It's crucial to understand the policy's terms and conditions before surrendering it, to grasp the possible financial implications fully.