Are you thinking about obtaining some of the cash value in your permanent life insurance policy? One of the benefits of owning a permanent life insurance policy is the cash value that can grow. There are a few things you should know.
What you should know about policy loans
Unlike traditional loans from a bank, you don’t have to pay back a life insurance policy loan. However, keep in mind that the loan interest will continue to build and be added to the loan balance as long as the policy is in force.
It’s important to remember that the money you borrow and don’t pay back will be subtracted from your death benefit when you die, which means your beneficiary will receive less.
The cash value that builds in your policy is tax-deferred. However, the amount can be taxed if you surrender or lapse the policy before paying it back. The taxable portion would be the amount by which the loan exceeded the total amount of premiums you have paid into the policy.
Withdrawals from a life insurance policy
This depends on your policy contract; you may be able to withdraw some of the cash value that has accumulated from your policy. The amount you withdraw may have tax implications for you and reduce the death benefit your beneficiaries receive—research all the impacts of making a withdrawal before doing so.
Surrender life insurance policy for cash value
If you no longer want or need your life insurance policy, there is a possibility that you could surrender it for the cash value. If your policy has accrued a cash value over the years, surrendering that policy means you will stop paying premiums, forfeit the death benefit, and receive cash surrender value that has accrued in the policy.
Life insurance is to provide your family with financial security when you die. Being able to take a loan against the cash value from your policy can provide you with additional benefits while you’re still alive. If you’re thinking about taking a loan on your policy, be sure to meet with your insurance broker to make sure you understand everything.
Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.
