Should you choose to surrender your life insurance coverage and take the cash, be sure to consider the income tax consequences. While it is correct that you can defer the taxable gain by exchanging your policies for annuities, this is an economic decision you and your wife should make based on your unique situation. We strongly suggest that you shop for and price long-term care insurance coverage which, at your age, should not be overly expensive. And the premiums are deductible. Whole life insurance accumulates increasing cash value on a tax deferred basis, meaning that you are not taxed until you take it out.
Some people choose to use the cash as an income stream during their later years.
If you borrow against the cash value, you will reduce the amount of your coverage. In other words, at death, the amount of the unpaid loan and accrued interest will be deducted from the gross policy proceeds. Therefore, if a beneficiary or personal representative is counting on using the entire policy proceeds, there could be a big surprise. Home Email to a Friend Join I-Care, an elderly issues email newsletter. All rights reserved.