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Cashing Out Your Whole Life Policy

Cashing out your whole life insurance policy is something that shouldn’t be taken lightly. It’s a major decision that can have a serious and lasting impact on your financial health. Many people purchase a policy when their children are young as protection in the event of a tragedy. When the kids have attained adulthood, married, or finished college, many individuals begin looking at cashing in their life insurance.

There are multiple options to be considered and each comes with its own risks and benefits. Depending on the policy, the cash you withdraw will be through surrendering/cancelling the policy, a withdrawal, or in the form of a loan.


If you surrender the policy, you’re cancelling it. Your heirs will receive nothing if you die and you’ll get the cash value of the policy, minus any fees or penalties the insurance company charges. Surrendering the policy should be the action of last resort unless you’re absolutely certain you won’t need it any longer.


Making a withdrawal is a viable alternative if you want the policy to stay in force, but still need some cash. A withdrawal will give you a limited amount of money that’s typically tax-free. If you withdraw an amount that exceeds a stipulated portion of the premiums you’ve paid, you’ll have to pay taxes on it at the full rate and the amount heirs receive will be reduced accordingly.


Borrowing against the policy is a little different. The money comes from the issuer of the policy and you’re essentially using the insurance policy as collateral. The cash may or not be subject to interest, depending upon the policy. If you don’t pay the interest out of your own monetary resources, it will be added to the loan. Any money that isn’t paid back before you die will be deducted from your death benefit.

Think Carefully

If you die and haven’t utilized any cash option, your heirs only receive the stated policy amount and any cash value remains with the insurance company. Some policies enable you to tap into the accumulated cash value to pay for premiums or grow a portfolio. Think carefully before implementing any strategy.

For more information about how The Sena Group can help you with any

of your insurance needs, please contact us at 561-391-4661.

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The Sena Group
6501 Congress Ave., Ste. 100
Boca Raton, FL 33487