Should You Cash Out a Life Insurance Policy?

LOS ANGELES - Nov. 5, 2024 - PRLog -- If you have a whole life insurance policy, a universal life insurance policy or a permanent life insurance policy, you can access its cash value during your lifetime. Even if you have a term life insurance policy, you can get a cash surrender value for it, if the need arises.

Generally speaking, finance experts say to wait 10 to 15 years before cashing out a life insurance policy or selling it. There are many reasons for this, but there are also reasons to do it even sooner.

Cashing out a policy won't impact your credit, and you won't have to do a credit check to get the money you may need quickly. However, there are financial repercussions to cashing out a policy, like putting a dent in long-term financial plans, having to pay taxes on the money and policy cancellation. You may end up leaving surviving loved ones nothing, if you cash out completely, or less than you'd hoped, if you withdraw some of the funds.

Here's more on when and how to cash out a life insurance policy and what you may want to do with the money, if you decide cashing out is the way to go.

Cash Withdrawals Vs. Cashing Out a Life Insurance Policy
Cashing out or surrendering a whole or permanent life insurance policy, or even selling it to an insurance settlement company, is very different from withdrawing cash and allowing the policy to stay active. Let's take a look at three options to get the money you need.

Withdrawing Money From a Permanent, Universal Life or Whole Life Insurance Policy
You may want to consider taking out some cash but leaving behind enough so that the policy pays its own premiums. A life insurance cash value can pay your premiums for you. Or, you can take out as much cash as you need but continue to make monthly premium payments to keep the policy active so that you can leave behind a death benefit for your loved ones. Keep in mind that premiums increase as you age.

If you withdraw more than the premiums you've paid for the policy ... (full article at https://smartfinancial.com/how-to-cash-out-life-insurance )