Hey guys, when is the best time to withdraw the full face value of my life insurance policy? I have been interested in finding out what its worth is. Is there a way to recommend the best time and process?
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With most whole life insurance policies, the cash value amount begins to accrue after an initial 2 to 5-year period and is only accessible during your lifetime. This cash value is available to withdraw or borrow, including any accrued interest or dividends paid.
You can cash out through:
- Withdrawals: You can withdraw up to the amount you’ve paid in premiums without paying taxes. However, this will reduce the death benefit.
- Loans: You can take out a loan against the policy’s cash value. This doesn’t require a credit check, but unpaid loans will reduce the death benefit.
- Surrender: Surrendering the policy means you cancel it and receive the cash value minus any surrender fees. This ends your coverage.
Is that the only insurance you have? $25,000 isn’t nearly enough for someone with two kids. Plus, if you cash out the policy, you might have to pay taxes on the gain.
Another option is to roll that cash value into a newer, bigger policy through a 1035 exchange.
As soon as I got married, I cashed out my wife’s whole life insurance policy, which her parents had set up when she was born.