The early cash value rider is an optional rider providing for higher cash values in the early years of a policy in the event of a full surrender for cash. It effectively waives the surrender charges and premium load associated with a life insurance policy, or returns all or part of the cumulative paid premiums, whichever provides the greater benefit. In exchange for the early high cash value, the cash value in the later years of the policy will be lower than it would have been without the rider.
Insurers have designed the early cash value rider primarily for the business market. Businesses can use it in a nonqualified supplemental retirement plan when a company wants to reward a key employee. Additionally, a business may add the early cash value rider when using life insurance in qualified plans, for premium financing and in other instances where having high early-year cash values are important.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM