Cash value is a living benefit built into permanent life insurance: whole life, universal life and indexed universal life. Part of each premium goes to the cost of insurance; the rest builds cash value that grows tax-deferred.
How it grows
In whole life, cash value grows at a guaranteed rate and may be boosted by dividends. In IUL, interest is credited based on a market index within a cap and a floor. Either way, growth is slower in the early years while the policy's upfront costs are covered.
How you use it
- Policy loans: borrow against your cash value without a credit check
- Withdrawals: take out money, generally tax-free up to what you paid in
- Premium payments: use cash value to cover premiums later in life
What to watch
Loans and withdrawals reduce the death benefit. If a policy lapses with a loan outstanding, the gain can become taxable. And surrendering a policy in its early years can mean getting back less than you paid. Design and funding matter, which is why we review every policy we place.
Quick answer
Can you withdraw cash value from life insurance?
Yes. You can take withdrawals or policy loans. Withdrawals up to your cost basis are generally tax-free; loans are generally tax-free while the policy stays in force and isn't a MEC.