Ask Terry Questions Life insurance policy — taxable withdrawal?

Life insurance policy — taxable withdrawal?

By Terry Savage on November 11, 2019 | Insurance & Annuities

I have two questions. 1. Do you have to pay taxes on a insurance policy if you cash it in? I have a life insurance policy that I borrowed against . The balance of the loan is almost the same as the cash value of the policy. Should I just cash it in and take the money and save it? The company that I retired from has given me a Life insurance policy of fifthteen thousand dollars. i have no children, my parents are gone. Three nephews only two that I have contact with, 2 sisters one of which I do not deal with.

Terry Says

You need to contact the insurance company to find out what portion of the remaining cash value may be taxable to you. It all depends on where the money came from to buy the policy, and whether your withdrawals (borrowings) were from the original investment or the income earned within the policy. Most people want to leave at least enough for burial expenses, but if you want to purchase a prepaid burial package, this might be the money that allows you to do this. Then you won’t have to rely on your relatives to follow your wishes. Again, contact the insurance company for specific details on the value of the policy and the tax status.



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