If you have whole life insurance you can cash in the cash value of the policy which is known as surrendering. Below are a few things to know about surrendering a whole life insurance policy:
- The cash value you receive will be minus any loans and premiums owed to the insurance company.
- Be aware of fees involved in cashing in. Sometimes fees for cashing in whole life insurance are very high. It important to know what the surrender charge period is ( how long you have to hold the insurance to avoid surrender fees). Check if your policy has what is called “zero surrender cash value” and if so how long it is for. You don’t want to cash in if you get absolutely nothing.
- Consider the tax consequences carefully because any gains (above premiums) received will be subject to income taxes.
- Before surrendering look at taking a loan off of the policy instead, it maybe a better option as the payments are quite flexible.
- Be aware that if you surrender your policy it is likely that it will harder to obtain similar coverage again.
- Most of the time surrendering isn’t a good option unless you really need the money, an insurance policy loan is not available and the beneficiary doesn’t need the protection.