What Does Liquidity Mean In A Life Insurance Policy? 
Liquidity in life insurance generally refers to the cash value in permanent life insurance . While the primary reason to have life insurance is the income tax free death benefit , the living benefits of ownership derive from its cash value . The owner can partially withdraw or borrow cash values while continuing the policy or the owner can surrender the policy entirely and receive its cash surrender value . Any gain in the policy would be taxable as income to the owner . 