What Are The Tax Implications Of Cashing In A Life Insurance Policy? 
That is a great question ! One of the great benefits of a whole life policy -LRB- Term policies do not have this -RRB- is the cash value that the policy accumulates as it ages . As long as the cash value stays within the policy , it is tax free . It can be borrowed against , and still be tax free . But if the policy is cashed out , or `` surrendered '' , any cash value amount that is more than the total amount of premiums paid is considered to be income , and therefore taxable . If you need some cash , but do n't want to get a tax bite while getting it , you may really want to consider borrowing vs. surrendering . Contact me , and I 'll walk you through the advantages/dangers of doing this . Thanks for asking ! 