Nine Ways to Use Your Whole Life Insurance Policy to Get Cash

“The best things in life are free
But you can give ‘em to the birds and bees
I need money;that’s what I want!”
-from Money (That’s What I Want), written by Berry Gordy and Janie Bradford.

Recorded in 1959 by Barrett Strong, Money (That’s What I Want) struck a chord with the public (no pun intended), becoming the first hit record for Gordy’s Motown enterprise. The song went on to be covered by nearly 50 other recording artists and was named by Rolling Stone as one of “the top 500 songs of all time.”

For over 50 years, people have been singing along with the chorus, “I need money –  that’s what I want!” And for those with whole life insurance policies, there are several ways for policyholders to get “a whole lotta money” when needed. Here’s an overview of the ways to use your policy to get cash when needed:

  1. Surrender Your Policy for its Cash Value.
    Once seen as the “only” option if a policy was no longer wanted, needed, or affordable, many policyholders still take this option simply because they do not understand the other options available to them.

  3. Sell Your Policy As we have talked about in our posts about Life Settlements, one way to get cash when you need it is to sell your policy and the rights to your death benefit. This option has only been widely available the last few decades, and it is increasing in popularity.Selling a policy can work well for people who are very elderly and/or suffering from serious health issues, both which increase the likelihood that there will be willing buyers. But what if you’re 50 years old and competing in marathons?

  5. Withdraw Your Cash Value
    If you are withdrawing below your “basis” (the amount you’ve paid into your policy), then you can withdraw part (or even all) of your cash value without penalties or taxes. You also don’t have to pay back what you withdraw, as it was your money to start with. This might be a preferable option to a home equity loan or borrowing from your 401k or IRA, as there are no penalties, taxes, or qualifying procedures. However, your cash value stops growing if you withdraw it, so you might want to consider the next option…

  7. Borrow Against Your Cash Value
    Typically, people borrow against their cash value by going directly to the life insurance company for the loan. Since the cash value is collateral and the company has that in their possession, this is also fast and hassle-free (no credit checks, pay stubs, or approval process.) If the rates at your bank are better, you might be able to borrow from your bank instead, still using your cash value as collateral. 

    People and even financial advisors often talk about “borrowing your cash value.” But that is a misleading, inaccurate phrase. You don’t actually borrow the cash value itself (nor do you pay back interest to yourself, in spite of what you might have been told). If you’re borrowing from you insurance company, you’re leveraging your cash value by borrowing against it.

  8. Borrow Against Your Death Benefit
    In some situations, you can leverage your policy to borrow from a bank or a private individual, using your death benefit as collateral. As in selling your policy, this won’t be an option unless you are in your 80’s or 90’s. But depending on your situation, it might make more sense than selling your policy. 

    And if you require the money for medical care – perhaps you are battling cancer or another serious illness – you will want to know if your policy provides the following benefit:

  9. Receive an Accelerated Death Benefit
    Whether or not you have this option available to you will depend on what options and riders you chose when purchasing it. You’ll definitely want to get your policy reviewed to see if you have an accelerated death benefit available to you.

  11. Annuitize Your Policy
    In contrast to borrowing against your policy, this is a non-revocable option that should be used only late in life with the guidance of a professional. Most insurance companies offer this option. 

    Not unlike a reverse mortgage, this option will allow your policy to start paying you. You would select a time period, such as 10 or 20 years, life expectancy, or life plus a certain amount to the beneficiaries. You would receive a specified amount of income each month during that time frame.

  12. Take Your Dividends Out in Cash
    If you are just looking for “a little extra” cash to make the difference between surviving and thriving, this may be your ticket. Typically, the dividends from your policy are used to purchase paid-up additions, but instead, they can be received in tax-free cash up to your basis.

  14. Set Up a Charitable Remainder Trust with your Policy
    Charitable remainder trusts can be used to sell a highly appreciated asset (such as real estate, stocks, or a business) in a way that reduces capital gains taxes and also benefits the charity. It’s also a way for the person donating the policy to get an income stream, which comes from the charity who invests the money from the asset.

For more information on this and other options, see my book, Live Your Life Insurance. You can get a hard copy from Amazon or purchase it in downloadable digital ebook or audio formats at

Need help understanding your policy and your options? We can help! For a limited time, we are offering a No-cost, No-obligation, Life Insurance Policy Review. Whether you’re considering using your policy to get cash and want to weigh your options, or you simply want to understand the benefits of your policy, we’d love to talk with you. Get all the details here.

This entry was posted in CASH VALUE INSURANCE, INSURANCE AS AN ASSET, PROSPERITY ECONOMICS, WHOLE LIFE INSURANCE and tagged , , . Bookmark the permalink.

4 Responses to Nine Ways to Use Your Whole Life Insurance Policy to Get Cash

  1. Marigail Hensley says:

    I have a $10.000 whole life policy which I’m trying to sell or get a loan on. It’s cash value of $2.000 is almost gone. I took this policy over for that reason so that it would not be cancelled. I own this policy on my sister who has a life threatening genetic illness and she no longer needs this policy as there are other’s in place for her. I’m either trying to sell it for $4.000 or get a loan on it in the same amount. No one wants to buy a whole life policy unless it’s $100.000 or more. Where can I go with this policy I have to get a loan or try to sell it? I’m lost.

  2. Kate4Kim@P4P says:

    You are correct, investors and life settlement funds who purchase policies are looking for larger policies, unfortunately for your situation. Is it possible for you to simply keep the policy yourself rather than selling it? You might ask about an “automatic premium loan” that would help you pay the premiums for awhile. You could also check with a local, small bank or credit union, though most would be more likely to loan against cash value than a death benefit. You also might consider seeing if another family member would be willing to purchase it and maintain it.

  3. Deb says:

    I have three whole life policies on my husband…. My husband is 64 in good health but had a quadruple bypass 20 years ago. We would like to sell one policy. It will be fully paid up in 2025. How do I go about finding a buyer? And what can I expect to sell it for? Would appreciate any advice.

  4. Kate4Kim@P4P says:

    Deb, I believe you have already received a response from Kim or Jeune, though I’m posting “just in case.” (Also, I deleted the financial specifics from your comment.) This is a common question and the answer is useful to others as well.

    As far as selling life insurance policies on the open “market” (for instance, to a company that buys them for purposes of life settlement investments), your husband is too young and healthy! Life settlement companies buy policies that insure those who are elderly (typically in their 80’s) and not healthy, but suffering from serious health issues.

    Sometimes a family member or even a private party can be found who is interested. And of course, you can always cancel for the cash value. However, you might be very interested in our article on various ways to KEEP a policy without having to keep making payments on it. There may be one or more ways that work for you in your situation!

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