Can I Cash Out My Child’s Life Insurance Policy?

Shawn Plummer

CEO, The Annuity Expert

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:

  1. Type of Policy: Cash value is typically a feature of permanent life insurance policies, like whole or universal life. Term life insurance, on the other hand, does not accumulate cash value.

  2. Surrender Charges: Some policies may have surrender charges if cashed out within a certain period.

  3. Impact on Coverage: Cashing out the policy will end the insurance coverage.

  4. Tax Implications: The cashed-out amount might be taxable if it exceeds the premiums paid.

  5. Future Insurability: Cashing out a child’s policy might affect their ability to get life insurance later, especially if their health has changed.

  6. 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 PolicyOnly permanent policies like whole or universal life accumulate cash value.
Surrender ChargesFees may apply if the policy is surrendered early.
Impact on CoveragePolicy terminates upon cashing out.
Tax ImplicationsPotential taxes if cash value exceeds premiums paid.
Future InsurabilityMay affect future ability to obtain life insurance.
Alternative OptionsBorrowing 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.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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