If you make a withdrawal from the cash value in a life insurance policy, the death benefit will decrease. If you withdraw everything, the policy terminates. Withdrawing money from life insurance is tax-advantaged in that the IRS considered your withdrawals a return of the premiums you paid for the policy. So you can withdraw that amount of money without paying taxes. Any gains from dividends, however, would be taxed - but these would not occur until you've withdrawn all your premium payments.