Four Ways to Access the Value of a Life Insurance Policy
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Life insurance isn’t only for your survivors: Find out how to use its cash value during your lifetime.

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Life insurance can be used as a flexible financial tool to cover a variety of basic protection needs and planning strategies. Your life insurance policy offers death benefit protection to help provide financial support for a surviving spouse or income for a child, family member or dependent with special needs. It could also go toward estate taxes, provide funding to buy out a business partner or yield financial support for a charity or community organization.

But the benefits of life insurance aren’t only for survivors. There are also ways to access the value of a policy during the policyowner’s lifetime. In fact, what you do with these funds during your lifetime could be just as important as the protection your policy provides for your heirs. Policyowners may find a policy’s cash value helpful when a major expense or the need for ongoing care arises. If policyowners face certain health conditions, they might take advantage of living benefits, which are generally optional supplements available with the policy for an additional cost. One caveat is that before you consider accessing your life insurance policy during your lifetime, talk with your financial or tax professional about any tax implications.

Here are four paths to access the value of a life insurance policy while the insured is still alive.

Draw on its cash value

If you own a cash value life insurance policy, including all forms of universal (sometimes called permanent) life insurance, you may build underlying cash value over time, which can be accessed while keeping at least a portion of the policy’s death benefit intact.

Policy loans: Borrow against the available cash value of your life insurance policy. Provided that your policy has sufficient remaining cash value to pay ongoing charges, your policy’s death benefit will remain the same. Policy loans generally offer lower interest rates than bank loans and can be repaid at your convenience. Any outstanding loan debt (the balance plus any accrued interest) will be deducted from the death benefit at the insured’s death. 

Withdrawals: You can take withdrawals from the policy’s available cash value without interest charges. A withdrawal charge may apply and any policy withdrawals will reduce policy values and may reduce benefits. Withdrawing a sum too large could decrease the death benefit or affect the terms of your policy, but a withdrawal may be an easy solution if your policy has such a feature.

Policy surrender: In many cases, you also have the option of canceling the life insurance policy and receiving a cash payment for its net cash surrender value (the policy’s accumulated cash value less any outstanding policy debt and surrender charges). Because surrender charges may apply for many years after a policy is issued, the net cash surrender value is generally higher the longer you own the policy. With policy surrender, you won’t owe interest or need to repay as you would with a policy loan. You do, however, give up the life insurance policy and lose any death benefit you might have planned on for your survivors.

Take advantage of living benefits

If you meet certain criteria, you may be able to tap into a portion of your policy’s death benefit during your lifetime through living benefits. Living benefits are either included when the policy is issued or available as optional riders* with most life insurance products. For example, if major health issues arise, you may be eligible for living benefits. Be aware that taking living benefits will reduce your life insurance policy’s death benefit and cash surrender value and may impact the availability of your policy’s other optional benefits. Consult a financial professional to discuss whether living benefits may be useful.


Riders will likely incur additional charges and are subject to availability, restrictions and limitations. When considering a rider, request a life insurance policy illustration from your life insurance producer to see the rider’s impact on your policy’s values.

Benefits paid by accelerating the policy’s death benefit may or may not qualify for favorable tax treatment under Section 101(g) of the Internal Revenue Code of 1986. Tax treatment of an accelerated death benefit may depend on factors such as life expectancy at the time benefits are accelerated, the amount of benefits, the amount of qualified expenses incurred, or if similar benefits are being received under other contracts.  Receipt of accelerated death benefits may affect eligibility for public assistance programs such as Medicaid.  When benefits are received from multiple policies providing long-term care or chronic illness benefits for a given insured, including policies with different owners, all of those benefits must be aggregated to determine their taxability. Tax laws relating to accelerated death benefits are complex. Pacific Life cannot determine whether the benefits are taxable.  Clients are advised to consult with qualified and independent legal and tax advisor for more information.

Pacific Life is a product provider.  It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

In order to sell life insurance, a financial professional must be a properly licensed and appointed life insurance producer.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company.  Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company.  Product availability and features may vary by state.  Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

Pacific Life’s Home Office is located in Newport Beach, CA.


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