Can I Withdraw Cash from a Variable Life Insurance Policy?

life insurance cash withdrawal

In the 1970’s, insurance companies introduced variable life insurance policies to compete for consumer investment dollars against other financial institutions. Variable life insurance policies provide policyholders with a way to save money while providing death benefits to heirs upon their demise. During the policyholder’s lifetime, monthly premiums are paid towards the policy. A portion of the payment goes to offset the overall cost of the insurance while the remaining balance is actually put towards investments that may or may-not increase in cash value, depending on the overall market.

Can You Withdraw from Your Life Policy?

With a variable life insurance policy you cannot withdrawal cash but a loan can be taken against the total value of the investment depending on the cash value. When you opt to take a loan and not withdraw cash from a variable life insurance policy it may negatively impact the amount of money your heirs ultimately inherit. During your lifetime, loans from a variable life insurance policy can provide you with some tax free access to money to be used as you see fit. It is important to confirm that information with your variable life insurance policy provider first however.

By borrowing against a variable life insurance policy, not only will the death benefit be a lower amount, the cash value of the investment will be negatively adjusted as well. If the policy lapses due to non-payment and there is an outstanding loan on the amount, the balance of the loan will be tallied up with the existing cash surrender value and a portion of it will become taxable.