Give up the policy.
You have the option of canceling your life insurance policy and receiving the surrender value, which is the cash value less any fees. If you pick this option, you will no longer be protected by the policy, and your family will not get a death benefit if you die. You may have to pay the penalty if you cash out your policy too soon, depending on how long you’ve had it. If your payout exceeds the premiums you paid, you may be required to pay income tax on the difference. Surrendering your policy may not be a wise choice unless you are confident that you no longer require life insurance to pay for your family after your death.
Withdraw your funds.
In most cases, you can withdraw a portion of the cash value from a whole life policy without canceling the coverage. Instead, your heirs will receive a reduced death benefit when you die. Generally, you won’t have to pay income tax on withdrawals up to the number of premiums paid into the insurance. Because you are sacrificing a portion of your coverage, this option is a partial cash surrender.
Use the policy to your advantage.
You can borrow against the cash value of several plans. Borrowing against life insurance may be easier than securing a loan elsewhere because there is no credit check and flexible payback schedule. When you take out a life insurance loan, you are expected to repay it with interest at some point. If you die before repaying the entire amount, the amount you owe is deducted from the benefit granted to your heirs.
Take care of your premium.
If you need money to pay bills, and one of those is the life insurance premium, your cash value could be useful. You may be able to avoid paying out-of-pocket premiums on your whole life insurance coverage. Instead, you can use the cash value to cover your premiums for some time, protecting your policy while you weather a financial storm.
