Life Insurance Policy Withdrawals: Will It Reduce Your Death Benefit?

Shawn Plummer

CEO, The Annuity Expert

Understanding the Impact of Withdrawals on Life Insurance

Life insurance policies, especially whole life and universal life policies, often accumulate cash value over time. Policyholders can typically make withdrawals or loans against this cash value. The impact of these withdrawals on the death benefit varies based on the policy type and contract terms.

Examples of Policy Impacts

  1. Whole Life Insurance: If you withdraw from the cash value, it can reduce the death benefit. For instance, if you have a $500,000 policy and withdraw $50,000, the death benefit might be reduced to $450,000.
  2. Universal Life Insurance: These policies are more flexible. Withdrawals may reduce the death benefit, but policyholders can sometimes adjust premium payments or death benefits to offset the impact.

Key Considerations

  • Interest and Fees: Withdrawals might incur fees or interest, which can reduce the cash value and consequently, the death benefit.
  • Policy Terms: Specific terms regarding withdrawals and their impact on the death benefit are outlined in the policy contract.
  • Tax Implications: Withdrawals may have tax implications, affecting the overall benefit of the policy.

Withdrawals Impact on Different Life Insurance Types

Insurance TypeImpact on Death BenefitFee/Interest on WithdrawalAdjustable Premiums/Death Benefit
Whole LifeTypically ReducedYesNo
Universal LifeVariableYesYes


Withdrawals from a life insurance policy’s cash value can reduce the death benefit, but the extent varies with the policy type and its terms. It’s crucial to understand these details to make informed decisions. Contacting a financial advisor or insurance agent is recommended for personalized advice and understanding specific to your policy.

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.

Contact Us

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

Scroll to Top