How To Withdraw Cash Value From a Life Insurance Policy

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Withdrawing cash value from a life insurance policy is one way that those who are having financial challenges can obtain the cash they may need. Perhaps you have experienced an unexpected job loss, want to invest in an investment property or have had a decrease in salary and want to use the money that is present in your policy. Look into getting cash value from a life insurance policy in order to meet your cash flow needs and desires.

Obtain money via direct withdrawal from your life insurance policy. Keep in mind that if you choose to go this route to withdraw cash value from your life insurance policy, you may be responsible for the payment of any taxes based on the part of the withdrawal that is greater than premium payments made during the life of the policy. For example, if you have $2,000 in cash value as a part of your life insurance policy and your premium payments total $1,000, you would be able to withdraw $1,000 or less without tax. However, if you chose to take out more than $1,000, you would have to pay taxes on the amount that you withdraw.

Obtain a loan against the life insurance policy. Acquiring a loan means that you do not pay taxes at the time of the withdrawal. Keep in mind that if there is any lapse in the life insurance policy coverage, you may need to come up with the money to pay the taxes on the portion of the cash value that is greater than your premium payment amount.

Surrender your life insurance policy. Decide if you would like to keep the death benefit protection that is a part of your life insurance policy. Terminating this portion of your policy would result in the payment of a fee that is commonly called a surrender fee. Paying this cost would allow you to cancel this benefit. However, the payment of a surrender fee could cause your cash value to decrease. Again, be aware that you would also have to pay taxes on the amount of money that you get from your insurance company that is greater than the amount you paid in premiums.


  • • Consider consulting an attorney who is an expert at tax issues before you withdraw any insurance money.


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