How long can an insurer legally defer paying the cash value of a surrendered life insurance policy?

The correct answer is six months. Insurers are authorized to defer payment of the cash value of a surrendered life insurance policy for up to six months. This policy is in place to protect the insurer from sudden financial strain that could occur from a large number of simultaneous policy surrenders. The six-month deferral period allows the insurer to manage their cash flow more effectively while ensuring that policyholders are still able to access their benefits in a reasonable timeframe.

This standard is generally recognized across many jurisdictions and helps maintain the financial stability of insurance companies while balancing the rights of policyholders. In practice, while insurers have the option to defer payment, many aim to process such requests promptly, recognizing the importance of both customer service and compliance with regulatory requirements.