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priyankamuley
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Joined: 09 Oct 2007
Location: United States
Online Status: Offline
Posts: 50

Posted: 04 Jul 2010 at 11:11 \| IP Logged

If an insurance policy has a cash surrender value, any portion of the premium that does not add to the cash surrender value is expensed.

can some one pls explain this?

Futurepasser
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Joined: 28 Mar 2010
Online Status: Offline
Posts: 83

Posted: 04 Jul 2010 at 11:45 \| IP Logged

This may be oversimplifying it and it may be incorrect, but here's how I always thought of it:

Premium is $100.

Cash surrender value is $30.

$30 is an asset, $70 is expensed because, well, it is an expense! It offers no future benefit.

priyankamuley
Contributor

Joined: 09 Oct 2007
Location: United States
Online Status: Offline
Posts: 50

Posted: 04 Jul 2010 at 12:01 \| IP Logged

oh, I get it now. have made notes in my book. Thanks a ton future passer.

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