Can I cancel my whole life insurance policy and get my money back?
Asked by: Briana Deckow | Last update: November 2, 2025Score: 4.7/5 (8 votes)
Do I get money back if I cancel my whole life insurance?
If you decide to cancel whole life insurance or another permanent life product, you could receive a payout based on the cash surrender value. Surrender charges: Be mindful that surrendering your policy, particularly in the early years, often incurs surrender charges. These fees will reduce the amount you receive.
What is the penalty for closing a whole life insurance policy?
There is no penalty for cashing out whole life insurance because these policies are designed to offer the opportunity to build wealth. However, surrendering the policy may result in surrender charges if done before a specified date.
How do I cancel my life insurance and get a refund?
The insured has to contact the life insurance provider and convey their wish to cancel the policy. No refunds will be made if the policy is cancelled outside of the cooling off period.
Can you pull money out of a whole life insurance policy?
Cashing out a whole or universal life insurance policy reduces the death benefit payable to your beneficiaries. If it's a withdrawal, the full amount is subtracted from the death benefit. If it's a loan, any amount you don't pay back is subtracted from the death benefit.
What Happens If You Cancel Your Whole Life Policy?
How long does it take for whole life insurance to build cash value?
A whole life insurance policy will begin building cash value as soon as you pay your first premium, and it will continue building throughout the life of the policy as long as there are funds in the account.
What are the tax implications of cashing out a whole life policy?
Cashing out your policy
You're able to withdraw up to the amount of the total premiums you've paid into the policy without paying taxes. But if you withdraw on any gains, such as dividends, you can expect them to be taxed as ordinary income.
Do you lose money if you cancel life insurance policy?
In most cases, canceling a life insurance policy won't cost any money. If anything, by spending less on premiums you will be gaining money—money you can use for any number of other things.
What is the penalty for surrendering a life insurance policy?
This means the premium must be paid for a minimum period of 3 years. If you surrender after 3 years, the surrender value will be around 30% of the premiums paid. However, this excludes the premium paid in the first year and the premiums paid towards accidental benefit riders.
Do you get your money back after Cancelling a life insurance policy?
Do you get your money back if you cancel your life insurance? The answer to this is usually no. Protection insurance is a simple product that protects you financially against death and illness while you pay premiums. If you don't pay your insurance premiums, you aren't protected.
What is the cash value of a $10,000 whole life insurance policy?
Most whole life insurance policies mature at 121 years, although some mature at 100 years. Say, for example, that you purchase an insurance policy with a face value of $10,000. Once the policy matures, the cash value of the policy should equal $10,000.
How much does it cost to surrender whole life policy?
For annuities and life insurance, the surrender fee often starts at 10% if you cash in your investment in year one. It goes down to 1% if you cash it in during year nine and no surrender fees in year 10 or longer.
How much tax will I pay if I cash out my life insurance?
Proceeds up to your tax basis (total premiums paid) are generally not taxable, while any amount received above the tax basis may be taxed as ordinary income or capital gains, depending on the circumstances.
Can I cancel my insurance policy and get my money back?
Receiving an insurance refund will largely depend on why you're canceling the policy and how much of the premium you paid in advance. If you pay your full premium upfront, then you'll typically get a refund when you cancel your policy.
Do I get my money back if I outlive my life insurance?
Do you get your money back at the end of a term life insurance policy? You can't get your premium dollars back from a standard term life insurance policy once it expires. However, if you buy a return of premium (ROP) rider, then you could get some or all of your premium back if you outlive your policy.
What happens if you don t pay back your whole life insurance loan?
If you don't repay the loan with interest before you die, your beneficiaries won't receive the policy's full death benefit. Your policy may lapse. The outstanding loan balance will accrue interest until you repay it in full.
How much money will I get if I surrender my policy?
If surrendered in the second year, 30% of the total premiums paid will be returned. If surrendered in the third year, 35% of the total premiums paid will be given. If surrendered anytime from the fourth to the seventh year, 50% of the total premiums paid will be returned.
Can a whole life policy be reinstated after surrender?
A policyholder can only cash out the amount of money accumulated as a cash value. Once the insurance is surrendered, the life insurance coverage is no longer active, and the policy may not be able to be reinstated. The cash value is the amount of cash that grows over time as the premiums are paid on time.
Is there a fee to cancel life insurance?
Your policy's cash surrender value is its cash value minus any administrative or otherwise additional fees. While you will not receive a bill for canceling your policy, you can expect some money to be subtracted from your final payout.
Can you get your money back from whole life insurance?
Make Withdrawals
In fact, a whole life insurance cash-value withdrawal up to your policy basis, which is the amount of premiums you've paid into the policy, is typically non-taxable. Any withdrawals that exceed your basis, meaning you're dipping into gains, will be taxed at your ordinary income rate.
Can I cash out my life insurance policy?
You can cash out a life insurance policy. How much money you get for it will depend on the amount of cash value held in it. If you have, say $10,000 of accumulated cash value, you would be entitled to withdraw up to all of that amount (less any surrender fees). At that point, however, your policy would be terminated.
How do I stop paying whole life insurance premiums?
If you stop making premium payments you can receive the cash value or use that cash value to provide a paid up insurance benefit. The company must provide either extended term insurance coverage or reduced paid paid-up coverage.
What is the penalty for cashing out a whole life policy?
Penalties for Cashing Out Life Insurance
Many policies won't require this fee, so it's important to know what your policy says before cashing in. A surrender fee can cost 10%–40% of the value of cash you would otherwise receive, so make sure this is calculated and determined by reading your policy contract.
How to surrender a whole life policy?
If you want to surrender a whole life insurance policy, DoughRoller notes that “you have to actually call your insurance company to cancel the policy,” (which is unlike a term policy that only requires you to stop paying your premiums).
What life insurance can you borrow from?
Life insurance loans are only available on permanent life insurance policies — such as whole life and universal life — that have a cash value component. You likely can't borrow against a term life insurance policy since it probably doesn't have cash value. Learn more about term vs. whole life insurance.