How to: Withdraw Cash from a Permanent Life Insurance Policy
Posted in Life Insurance , Permanent Insurance
September 25th, 2009
Permanent life insurance is an excellent tool for not only protecting those you love after you pass, but for building an investment tool while you are still alive! Permanent life insurance is a twofold type of life insurance where financial benefits are left to those you choose that also gives you returns over time. With a permanent life insurance policy, policyholders have the option of tapping into the cash reserves they have built during their lifetime.
Withdrawing Cash
Cash can be withdrawn from a permanent life insurance policy after some conditions have been met. The first years of paying into a permanent life insurance policy typically go towards the cost of the coverage, but later can start adding up as a cash value. After several years of contributions, the policyholder will become “paid up” on their contract and can withdraw cash from their policy.
- Once a policy becomes paid up, there are several ways to withdrawal cash from a permanent life insurance. Once such way is by choosing to have the cash value of your account pay your remaining premium dues. If this strategy is combined by a cash withdrawal from a permanent life insurance policy, then the policyholder must start making premium payments again.
- Another way of withdrawing cash from a permanent life insurance policy is in the form of a loan. Taking a loan against a permanent life insurance policy is generally cheaper than borrowing from a bank as the interest rates on the loan against your own policy is less than the bank would charge you. Additionally, you can decide not to repay the loan to yourself at all! If that is the case then the amount borrowed plus the loan interest would be deducted from the benefit that would be to the beneficiary of your policy, thus providing them with less money in inheritance.
- The final way to withdraw cash from a permanent life insurance policy is by making a partial withdrawal of the policy’s cash value. This process can also reduce the total amount of the death benefit and in some rare cases, by opting to make a partial withdrawal of your cash value can partially withdrawing your cash value could completely obliterate your death benefits.
To learn more about permanent life insurance policies, be sure to check with an insurance expert who is qualified in helping you to plan out your retirement goals.