Under their terms valid contracts of life insurance cannot be canceled by the insurer except for nonpayment of premiums. However, a policyowner may end the arrangement at any time. Depending on the amount of time the policy has been in force and the method by which premiums have been paid, a substantial value may have accumulated in the policy. This occurs when the life insurance is purchased with a premium that prepays some of the funds a company will need to pay future claims and expenses.

This chapter addresses the question of how value accumulated within a policy is divided if a policy ends before the death of the insured. The following terms used to describe a policy�s discontinuation require some clarification:

None of these terms applies to an action or inaction by the policyowner before the policy�s grace period has expired.