If I take out cash from my policy, will my life insurance coverage go down?
Taking out cash from your life insurance policy is literally withdrawing your premiums and loaning from your death benefit. Normally, you don’t have to pay that loan back, unless you want to, and taking out the loan will not affect your death benefit, read more in “What are the fees associated with my policy?”. You have two options with your death benefit: (1) increasing and (2) level. An increasing death benefit will mean that you maintain the same amount of death benefit coverage and the investment value grows on top of the death benefit. However, this can get expensive later, and affect your investment returns in the future, since more and more of your premium will go towards paying the cost of insurance later on as you get older (and your cost of insurance gets more expensive). A level death benefit means that your death benefit will decrease until year 20, after which it will gradually increase until your passing. This keeps your cost of insurance low throughout your life while still allowing a large enough “vehicle” for your investment to grow tax-free (your death benefit has to be a certain multiple greater than your cash value in order to hold the investment return inside and to grow be tax-free). One popular option is for people to choose increasing death benefit and switch to level death benefit after they start retrieving their cash value from their investment account, so their cost of insurance doesn’t continue to rise after they’ve taken out cash from their policy.
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