How do I withdraw cash value from a life insurance policy?
Here are the Top 4 ways to withdraw the cash value from a life insurance policy.
1. Cash Value Withdrawal
You can take advantage of a tax-free cash withdrawals. You just have to make sure you only withdraw up to the amount you’ve paid in total premiums. If your withdrawal goes over that amount, it will be taxed as income. Also, unless you pay the withdrawal back, your death benefit will be reduced by the amount that you took out.
2. Policy Loan
Another great way to take advantage of tax free cash is with a policy loan. You can borrow against your cash value life insurance policy without having a credit check! The downside is that you will have to pay interest. This can be somewhere in the range of 4-8% depending on your policy and market rates. Make sure you pay the entire loan. If you don’t or only pay a portion – the balance is going to be deducted from the policy’s death benefit.
3. Pay your premiums with cash value!
You may have the option to stop paying the premiums on your policy and use the cash value of your policy to pay for them. There is a bit of risk involved. If you drain the funds in your cash value account completely, it may cause your life insurance policy to lapse. In other words, it would end your life insurance coverage entirely.
4. Surrender the policy
You have the option to surrender your cash value life insurance policy. This is another way of saying you’re cancelling your policy. With the life insurance cash surrender value — you will get back the amount that is in your cash value account, but any loans or unpaid premiums will be deducted before you receive your money.