Can I Cash Out my Child’s Life Insurance Policy?
Yes, if you own your child’s life insurance policy, you can cash it out. This process involves surrendering the policy to the insurance company in exchange for the policy’s cash value, if any. However, there are important considerations:
Surrender Charges: Some policies may have surrender charges if cashed out within a certain period.
Impact on Coverage: Cashing out the policy will end the insurance coverage.
Tax Implications: The cashed-out amount might be taxable if it exceeds the premiums paid.
Future Insurability: Cashing out a child’s policy might affect their ability to get life insurance later, especially if their health has changed.
Alternative Options: Consider borrowing against the policy or making partial withdrawals if possible, as these options may allow the coverage to continue.
Considerations for Cashing Out Child’s Life Insurance Policy
|Type of Policy
|Only permanent policies like whole or universal life accumulate cash value.
|Fees may apply if the policy is surrendered early.
|Impact on Coverage
|Policy terminates upon cashing out.
|Potential taxes if cash value exceeds premiums paid.
|May affect future ability to obtain life insurance.
|Borrowing against or partially withdrawing from the policy may allow continued coverage.
Cashing out your child’s life insurance policy is a decision that requires careful consideration of various factors, including the type of policy, potential fees, tax implications, and future insurance needs. Weighing these considerations will help you make an informed decision that aligns with your financial goals. Contact us today for a free quote.
Request A Quote
Get help or a quote from a licensed financial professional. This service is free of charge.