What happens to the cash value of a life insurance policy when it is surrendered?

When a life insurance policy is surrendered, the policyholder receives the cash value of the policy. This is the value accumulated through the premiums paid that exceeds the cost of insurance. When a policyholder decides to surrender the policy, they are effectively terminating the coverage but are entitled to the cash value, assuming the policy has a cash surrender value built up over time. This amount is typically paid out in a lump sum.

In this scenario, the other options do not accurately reflect the process of surrendering a life insurance policy. The cash value is not awarded to the agent, nor is there a financial return in the form of payouts if the policy has been underwritten appropriately. Additionally, the cash value is not lost completely; even upon surrendering, the policyholder can recover what they've paid into the policy to a certain extent, assuming enough cash value has accumulated.