How does cash surrender value differ from death benefit in a life insurance policy?

The correct choice highlights a fundamental difference between cash surrender value and death benefit in a life insurance policy. Cash surrender value refers to the amount of money a policyholder can receive if they choose to cancel or surrender their policy before it matures or before the insured person passes away. This value is accumulated from the policyholder's premium payments and investment growth and is specific to certain types of life insurance, such as whole life or universal life policies.

On the other hand, the death benefit is the amount paid to beneficiaries when the insured person dies. This payment is made regardless of whether the policyholder ever surrendered the policy or not. The death benefit serves as the primary purpose of life insurance: providing financial support to the policyholder's beneficiaries after their death.

In summary, the cash surrender value is essentially a cash option available to the policyholder during their lifetime, whereas the death benefit is a payout that occurs upon the death of the insured. Understanding this distinction helps clarify the functions of different components within life insurance policies.