How to Cash In Life Insurance Policies

Many families are struggling to pay bills, so they may wonder how to cash in life insurance polices. Cashing in a life insurance policy is easier than refinancing a house in most cases. However, some people may say it is not a good idea, but when the choice is money in hand or no money and facing financial ruin with a home foreclosure or medical need, most would go for the cash out.

Many individuals, in order to save their homes from foreclosure or feed their families, wonder how to cash in life insurance policies. The trick is to do so without paying taxes on the money received.

• Determine the age of your life insurance policy. The date should be printed somewhere on the front of the official document, which should be kept in a safe-deposit box or other safe place.


• Make sure the policy is younger than 12 to 15 years old. If the policy is about 10 years old, you are in good shape, anything older, the life insurance policy has probably reached cash value larger than the premiums paid into it.  


• Read the insurance policy or call your insurance agent to establish if the policy is a variable or universal life insurance policy. If it is one of these types of polices, tell the insurance agent you want to withdraw up to the amount of your paid premiums. This would be the amount that one could withdraw without having to pay taxes on the money. 


• When determining that your life insurance policy is too 'young' or too 'old' for withdrawing paid premium funds, it may be better to borrow some funds against the cash value. This is a loan that would need to be repaid but the taxes are deferred for a period of time in which an individual could possible repay the loan before the taxes are due. 


• Ask your insurance agent about a Life Settlement to gain two to seven times the cash surrender value of a policy if you are a senior over 70 years old and you have health issues. With a Life Settlement option, there is no need to sell the entire policy back to the insurance company.   


• Decide how to receive the cash, by electronic deposit or a physical check. Then use the money wisely.