Is Cashing Out Life Insurance Taxable? 
Cashing out a cash value life insurance policy in almost all cases will have proceeds subject to ordinary income taxes . The good news is most life insurance premiums have been paid with after tax dollars so , therefore only the proceeds or gains are subject to tax . You may also borrow from your cash value if you need money and those funds are income tax free . I suggest sitting down with your life insurance agent and discussing all of your options to avoid making a costly mistake . 