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March 10, 2019

Can I withdraw or cash out my whole life insurance policy?

cash out of life insurance policy

Cash Value in Life Insurance: What are My Options?

Sometimes, life happens in the worst way, and you find yourself in need of quick extra cash. While researching ways to regain your financial footing, don’t overlook your life insurance policy as a source of extra money.

What is Whole Life Insurance?

Whole life is one of the most common types of life insurance, alongside term life. Whole life is distinguished by lasting for the whole life (hence the name) of the person who took out the policy, as long as that person continues to make payments. Term life, on the other hand, only lasts for a set period of time, or for a term1.

Whole life insurance carries a cash value, noted as such on your insurance statements. This value is paid into with your premiums, but is not necessarily equal to the total amount you paid in premiums.

Can I Withdraw or Cash Out My Whole Life Insurance Policy?

You may borrow against your whole life insurance policy in two ways. The first way is to make withdrawals against the cash value. These will reduce or deplete the available cash value, and will lower your death benefit.

Another way to use the money in your whole life insurance policy is via a loan against the cash value. These loans do not reduce your policy’s cash value; instead, they’re a separate agreement with your insurance company as the lender. They must be repaid as with any other loan, but any outstanding balance at the time of death will be deducted from your death benefits2.

You can also totally cash out of your whole life insurance policy. Surrendering an insurance policy will return to you the cash value of the policy, less some fees, and will cancel the policy3. The amount you recoup from the policy is taxable.

So yes, you may withdraw money from your whole life insurance policy, or cash it out altogether. Before you do so, please consult with a professional tax advisor and your insurance Agent.

  1. “Whole life insurance,” Wikipedia
  2. “Can I Cash In a Whole Life Insurance Policy?” Farm Bureau Financial Services
  3. “Cashing In Your Life Insurance Policy,” Investopedia.com

Categories: Insurance, Life Insurance, Whole Life Insurance

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