If you withdraw up to the amount of the total premiums paid into the policy, it is not taxable as it is considered a return of premiums. If, however, you then withdraw any gains on the policy (e.g., dividends), then these amounts could be taxed as ordinary income.
What happens when you cash in a life insurance policy?
When you cash out a life insurance policy, you either take out a loan against the policy's cash value or surrender the policy back to the insurance company. If you take out a loan, you will have to pay it back with interest. If you surrender the policy, you will receive the cash value minus any fees or penalties.
What is the cash value of a $10000 life insurance policy?
So, the face value of a $10,000 policy is $10,000. This is usually the same amount as the death benefit. Cash Value: For most whole life insurance policies, when you pay your premiums some of that money goes into an investment account. The money in this account is the cash value of that life insurance policy.