A whole life policy accumulates cash value. This cash value increases over time. While you can cash surrender the policy at any time, you will only receive the amount of cash surrender value in the policy, you do not receive the face amount. The longer you hold on to the policy the more cash accumulation you have. Remember that when you surrender a policy by cashing it in you will lose the death benefit. If you need the insurance then take a loan on the policy if you need cash. Just make sure you pay the interest each year. The amount of the oan will be deducted from the death benefit if something happens to you.
Accessing cash from a permanent life insurance policy may have surrender charge implications in the earlier years of the policy that create illiquidity to the actual account cash value. The crediting performance of a permanent life insurance, whether participating whole life or universal life, will also dictate what cash can be withdrawn or borrowed if you don’t surrender it. There are rules that govern withdrawals and taxation as well as policy loan charges if you elect to borrow money.
If you surrender (cash in) a life insurance policy and the cash values exceed basis, you will trigger an ordinary income tax event. To determine what cash is available, you’ll need to order an in force ledger from the issuing life insurance company.
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If you surrender (cash in) a life insurance policy and the cash values exceed basis, you will trigger an ordinary income tax event. To determine what cash is available, you’ll need to order an in force ledger from the issuing life insurance company.