Can I cash out on my life insurance policy?
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Asked April 24, 2018
There are ways to cash out of your life insurance policy if it is a cash value life insurance policy. Cash value life insurance builds up reserves through the excess premiums and earnings. These same deposits are kept in a separate account within the policy.
Those with this type of life insurance policy are giving the option to access these accumulations of cash through policy loans, withdrawals, or partial or full release of the insurance policy. You also have the option to sell the policy for cash which is called a life settlement.
You are able to make withdrawals of cash from a life insurance policy similar to a withdrawals from your checking account. The amount is dependent on the type of policy as well as the company you are insured with. One of the best perks for this option is that the cash value withdrawals are not taxable.
There are a few things to keep in mind as a policy owner looking to make a withdrawal from your cash value life insurance policy. Withdrawals against your cash value can cause a reduction in the death benefit. These withdrawals may or may not be tax free and some or all of the cash can be taxed. These withdrawals can cause your premiums to increase, causing the policy to lapse.
Withdrawals may also come with a penalty if your under the age of 60 at the time that you make the withdrawal. There are many people who cash out of their life insurance policy and companies make the process easy. A good rule of thumb is to think about why you originally purchased the life insurance policy in the first place. Cash out when the proper research has been done to ensure this is what you want to do.
Answered April 25, 2018 by zenguy