Is Cash Value Of Life Insurance Taxable When Surrendered? 
Cash value life insurance gains are taxable at time of surrender of your life insurance policy . The amount you paid in with your premiums was paid with post tax dollars and not subject to tax . As Gary stated , the best way to avoid these taxes on your cash value gains is to borrow against the value and use your money tax free . The policy loan interest rate will be minimal compared to the rate of the taxes you will owe against your gains . This option as keeps your face amount death benefit in force until the cash value is depleted to a certain point , which by the way is still growing inside the plan . I advise you to call your agent or the insurance company to discuss your options to avoid unnecessary taxation . 