How to Cash in a Whole Life insurance Policy
The main features of a whole life insurance policy are cash value and death benefits. The death benefits are the face value of the policy, including paid additions and term insurance. The cash value is money that builds up from the policy overtime. Certain things will cause for cashing in a whole policy, but consider a few things before taking the next step.
- Explore using the cash without canceling the policy. Policyholders can use the cash without cashing in the entire policy. Check and see how it is growing each year before cashing. Life insurance with dividends allows for keeping a portion of the money for death benefits, use of the cash by borrowing, and payment for the interest and premium on the loan. This method is best for people who want or need some cash from the policy. The cash amount is subtracted from death benefits and the loan doesn’t have to be paid while the policyholder is alive.
- Consider the tax obligations before cashing in the policy. If the cash value is higher than the premiums paid on it then you might have to pay taxes. The option of borrowing the money prevents paying taxes.
- Proceed with cashing in the policy. The most practical thing to do could be just to cash in the policy. To start with the cashing in process, contact the insurance agent and ask for a surrender form.
- Fill out the surrender form. You can return the form to a local office or send it through the mail. Wait for at least 30 days to receive a check.