|Term Life||Whole Life||Universal Life|
|Variable Universal Life||Accidental Death||Final Expense Life|
Can you access funds in a life insurance policy?
How do I access my policy's cash value?
If you own a permanent life insurance policy, such as whole, universal or variable universal life, your policy has the potential to build up a cash value. You can access these funds through withdrawals and loans.
Withdrawals and policy loans can only be made in accordance with policy provisions and if the policy has accumulated sufficient cash value.
One way of accessing your cash value is to withdraw a certain amount of money from your life insurance policy. The amount available to be withdrawn will differ depending on the type of policy that you own. Withdrawals are tax-free up to the basis in the policy.1 Depending on the policy provisions, withdrawals may be subject to partial surrender charges if they occur during a surrender charge period and will reduce the death benefit.
1 Loans and withdrawals will reduce the policy value and death benefit. Provided the policy is not and does not become a modified endowment contract (MEC), 1) withdrawals are tax-free to the extent that they do not exceed the policy basis (generally, premiums paid less withdrawals and 2) policy loans are tax free as long as the policy remains in force. If the policy is surrendered or lapses, the amount of the policy loan will be considered a distribution from the policy and will be taxable to the extent that the loan and other distributions on lapse or surrender exceed the policy basis.
An alternative to accessing funds from your life insurance policy is to take a loan. The interest charged on the loan is generally lower than interest rates charged by banks. However, although the loan does not have to be repaid before death, any unpaid balance on the loan will be deducted from the policy's death benefit. This could financially harm your beneficiaries if he or she is counting on a certain amount of money from the policy for paying off funeral expenses or outstanding debt.
Transamerica agents and representatives do not give tax or legal advice. This material and the concepts presented here are for informational purposes only and should not be construed as tax or legal advice. Any tax and/or legal advice you may require or rely on regarding this material should be based on your particular circumstances and should be obtained from an independent professional advisor.