If I Cash Out My Universal Life Insurance Policy Will I Have To Pay Taxes On The Money?
Posted January 27, 2010 – 4:26 pm in: term life insuranceI have purchased a term life policy. My universal life policy is raising each year therefore eating up my cash value unless I pay higher rates. The term life policy rate is frozen for 10 years and is worth more than the univesal policy. I want to cash out the univerasl policy and cancel the policy.
Tags: Cash, Have, Insurance, Life, Money, Policy, Taxes, Universal, Will
5 Comments
Only if you get back more than you’ve paid in, in premiums. It’s possible, but not likely. You only pay on the net GAIN.
Not unless you have gained money. I suggest you “borrow” the cash value. There is never taxes paid on a loan, you do not have to pay it back, and you will still have the life insurance if something happens to you, minus the amount you borrowed against it. That’s a “win, win” situation in my opinion. The life policy will expire/cancel if you don’t continue to pay the premiums, however. But it sounds like that is what you want, anyway.
Always talk to your agent before canceling life insurance, but you should be able to get that money tax-free. You definitely want to check with the agent and the company before you do anything.
who cares if you have to pay taxes on it – Universal life is a rip off. You should promptly invest in good, solid term life insurance!
I get the impression that you don’t hate having a UL, but the increasing costs are bugging you. There might be a different way to structure this. Talk to an agent (independent agent) who will pay attention to you because the current fellow doesn’t seem to be doing it.
Any agent worthwhile should be able to answer your question about the taxability after they see your surrender value and your cost basis.