Can I Withdraw Money from My Life Insurance?

Should you withdraw money from your life insurance plan? Learn more about cash value life insurance and whole life insurance to determine how well it works for your needs.

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Can I Withdraw Money from My Life Insurance?

The goal of life insurance is to provide your family with the financial support they need should something happen to you. Yet, there may be times during your life that you may want to withdraw money from life insurance policies. Doing so is possible, in some situations, and can provide an important opportunity to you, but options for doing this can be limited in some cases.

What Is a Life Insurance Withdrawal?

Not all life insurance policies allow you to withdraw funds. Rather, only those that offer a cash value will allow this. Generally speaking, this does not happen with term life insurance, the most common form. Rather, it applies to whole life insurance policies. A life insurance withdrawal here means that you will be able to take money out of your policy because it has built up a cash value over the years you’ve had it. Only policies that do this tend to qualify for this type of withdrawal.


However, if a life insurance withdrawal is available to you, it can prove to be a valuable asset. Some people may elect to use the funds to pay for emergency needs. Others can use it to supplement their retirement income during their life. Because it is so valuable, it tends to be a good option for those who are considering buying whole life insurance right now.

How Does Whole Life Insurance Work?

Whole life insurance is available in various forms. Often called permanent life insurance, if you have a form called universal life insurance or any other version that has a cash value, you may be able to borrow from it. Over the years, you will make contributions to your policy through premium payments. In these forms of life insurance, a portion of those funds goes towards paying the premium – or cost of the policy – for administration fees.


Another portion goes towards funding the death benefit, or the amount that will be paid at the end of the policy if you die while it is in place. A third amount goes towards investments. Those investments grow in value over time, depending on how well they do. As they grow in value, the policy can pay you dividends, or earnings from the growth of the investments. This builds up the cash value of the policy. This is what you can borrow from.

Should You Take Money from Your Cash Value Life Insurance Policy?

It is important to consider the benefit of taking money from your cash value life insurance policy. While this may be an option for you, it also reduces the amount of money in the account that can be used for investments. The longer that money stays there the more value the policy builds over time. And, in most situations, that means less time for the underlying investments to grow. The longer you leave the funds in place, on the other hand, the more money can be invested to increase that value.

Will Permanent Life Insurance Help Pay for Your Retirement Needs?

Many people do not borrow from their life insurance until they reach retirement age. During this time, you may want to use the proceeds from your policy to help pay for your retirement needs. Some of the cash value policies allow this to happen. You can set up the cash value to send you a payment on a routine basis or in a lump sum. In all cases, it is important for you to consider the value of the policy to determine if it is enough to begin withdrawals from.

What You Should Know About Taking Cash Value from Whole Life Insurance

When it comes to taking cash value from whole life insurance, remember that you can only remove the portion that has built up over time. You also need to consider the value of doing this compared to any fees associated with the process. For those who are in retirement, withdrawals from life insurance can prove to be an excellent way to keep your income where it needs to be to achieve your goals. It is always important for you to consider the value of purchasing whole life insurance to have this benefit.