Can You Cash In A Life Insurance Policy? 
Video Transcript : Today 's question is , Can you cash in a life insurance policy ? Well , providing that 's it 's a cash value policy , you can go ahead and cash it in . Just a heads up , if the cash value is greater that your premiums paid , in other words , greater than your basis , you will have to pay ordinary income tax on the gain , and some of these contracts have surrender charges . If they have surrender charges , you 'll not only have to pay ordinary tax on gain , but you 'll also have to pay the surrender charge . Just keep in mind , I like the liquidity . If you can borrow from your policy and keep it in force , it 's a better deal . If you have to cash it in , you may want to think about , well I 'm just cashing it in to go into another policy , you may want to use a 1035 exchange to bypass the kind of issues like taxable event on ordinary income tax if you have gain in the policy . 