What Does It Mean to Cash Out Life Insurance?
To “cash out life insurance” means to access the financial value inside your policy while you’re still living. Depending on the type of policy you own, there are different methods for doing this:
- Surrendering the policy for cash value
- Taking out a loan against the policy
- Selling the policy through a life settlement
Each approach has pros and cons, and the right one depends on your financial goals and the type of life insurance policy you hold.
Can You Cash Out Life Insurance Before Death?
Yes—especially if your policy has accumulated value over time. Permanent life insurance policies such as whole life, universal life, and variable life all build cash value. That value belongs to you, and in many cases, it can be withdrawn, borrowed, or sold.
3 Main Ways to Cash Out a Life Insurance Policy
1. Surrender the Policy for Its Cash Value
Most permanent policies allow you to cancel—or “surrender”—your coverage and receive the cash surrender value. This is the total cash value minus any fees or outstanding loans.
Pros:
- Fast access to funds
- No need for buyer or third-party
Cons:
- Typically a lower payout than selling the policy
- Coverage ends
This method is simple but may leave value on the table. Always explore a life insurance cash out through a settlement before surrendering.
2. Take Out a Policy Loan
You can borrow money from your insurer using your cash value as collateral. Interest is charged, and any unpaid balance is deducted from the death benefit.
Pros:
- No credit check
- Easy access
Cons:
- Unpaid loans reduce your death benefit
- Interest accrues
This option works for short-term needs but isn’t ideal if you’re looking for a full payout.
3. Sell Your Policy in a Life Settlement
This is the most overlooked—but often most lucrative—option. A life settlement involves selling your policy to a licensed institutional buyer for a cash payout. After the sale, the buyer takes over premium payments and receives the death benefit in the future.
Pros:
- Payouts are often 3–5× higher than surrender value
Cons:
- You relinquish all rights to the policy
At Summit Life Settlements, we help clients sell policies through our exclusive bidding platform—often generating multiple offers for maximum return.
When Does a Life Insurance Policy Have Cash Value?
Only permanent policies accumulate cash value. These include:
- Whole life
- Universal life
- Variable life
- Indexed universal life
Note: Term life policies do not have cash value. However, if your term policy is convertible, we can help you convert it into permanent coverage—making it eligible for a life settlement and allowing you to cash out before it expires.
Can You Cash Out Life Insurance After a Diagnosis?
Yes. In fact, if you’ve been diagnosed with a serious or terminal illness, you may qualify for a viatical settlement—a special type of life settlement designed for policyholders with shortened life expectancy.
This allows for faster payouts, possibly tax-free, and often comes with a higher offer than traditional settlements.
How Long Does It Take to Cash Out a Life Insurance Policy?
One of the most common questions we receive is: How long does it take to cash out life insurance policy funds?
- Surrender: 1–2 weeks after completing paperwork
- Loan: Often within a few business days
- Settlement: 3–6 weeks, depending on documentation and underwriting
At Summit, we guide you through the life settlement process step by step and help accelerate each stage—from policy review to final payment.
Real Example: Frank’s Cash-Out Story
Frank, 74, had a $400,000 universal life insurance policy that he no longer needed. He was paying over $6,000 a year in premiums and considered surrendering it for its $38,000 cash value.
Instead, he reached out to Summit. After a free review and listing on our marketplace, Frank received four offers and accepted one for $82,000—more than double his surrender value. He stopped paying premiums and used the payout to support his retirement travel goals.
Why Work with Summit Life Settlements?
If you’re asking “Can you cash out life insurance?”, the answer is yes—but how you do it matters. At Summit Life Settlements, we help you:
- Understand every option available to you
- Maximize the value of your policy
- Eliminate premiums you no longer want to pay
- Access a network of competitive institutional buyers
- Navigate the process with zero upfront fees or pressure
Final Thoughts
Your life insurance policy isn’t just a future benefit—it could be a present-day financial asset. Whether you want to reduce expenses, pay off debt, or simply enjoy the fruits of what you’ve built, it’s worth finding out how much your policy is worth today.
Summit Life Settlements can help you explore every option for cashing out your life insurance, with no obligation and full transparency.
Frequently Asked Questions
Yes, but fees may apply depending on how long you’ve held the policy. We help you understand the true net value.
It might. Withdrawals above your cost basis and gains from settlements may be taxable. Consult your tax advisor.
Yes, but any loan balance will be deducted from the proceeds. We help calculate the net value.
Term policies don’t build cash value—but if yours is convertible, we may be able to help you convert and then sell it.
No. Our evaluations are completely free and come with no obligation to proceed.
