When Is Cash Value Of Life Insurance Taxable? 
The Cash Value on Life Insurance is only going to be taxable in certain situations . First , you have to withdraw the cash value . If you leave it in the policy , it will grow tax-free . Second , if you take Cash Value out as a loan , and as long as the policy does not lapse , the money will remain tax-free . Third , if you withdraw the Cash Value , and the money you take out is greater then the money you have paid in , then the difference will be taxable . Or if the policy lapses with an outstanding loan , then this will create a taxable event . 