Can I withdraw cash from my life insurance policy?
Last updated January 29, 2026
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One of the most significant benefits of permanent insurance — in addition to the death benefit — is that it builds cash value that can be used in many way: to supplement income in retirement, to cover college tuition, as a down payment on a home, or help make other large purchases.1,2 But, how can you get the cash from your life insurance policy? This article will help answer three key questions:
What types of life insurance policies build cash value?
How can I access my life insurance policy’s cash?
What if I don’t use the cash value?
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The types of life insurance that build cash value
There are two main forms of life insurance: term life and permanent life. Only permanent policies accumulate cash value, which acts as a wealth-building feature. Term life insurance is typically less expensive, but it does not build cash.
Permanent life insurance policies are typically more expensive than term life insurance policies for several reasons. First, permanent policies provide coverage for your entire life, not just a pre-determined amount of time, or "term."3 Secondly, permanent insurance policies can build cash value which can be used for future expenses (like supplementing retirement income). Term life insurance, on the other hand, is sometimes called "pure insurance," meaning there's an insurance payout for your beneficiaries if you pass away (the "death benefit") but nothing else.
Permanent life insurance is available in two primary types: whole life and universal life. While both provide permanent protection, a designated death benefit, and can build cash value, the main differences between them have to do with guarantees and flexibility:4
Whole life insurance offers guaranteed level premiums (also called fixed premiums, meaning that once set they don’t go up or down for the duration of the policy); and, a death benefit that stays the same for the length of the policy. Whole life also has a guaranteed rate of cash value growth, meaning you can predict the minimum cash value your policy will have over time. The cash value accumulates in an investment account and grows tax-deferred. If purchased from a mutual life insurance company, like Guardian, these policies may also earn additional dividends.5 By contrast, universal life insurance offers more flexibility with fewer guarantees. It gives you the freedom to adjust your premiums up or down within a certain range, which can be helpful for people with variable incomes. However, this can affect the rate of cash value growth, and even the death benefit amount if minimal premium payments are made for too long.6 With both whole life and universal life, the actual amount of cash value you build over time will vary based on the specific terms of your policy.
Four ways to access your cash from a life insurance policy
It usually takes a few years until the cash value in a policy grows to a usable sum, but once that happens, you’ll have a financial asset that provides many advantages you can use while you’re still alive. Unfortunately, many people never maximize their cash value benefit because they don’t know how. There are four methods for accessing the cash value in a universal or whole life policy:
Surrender: One option is to cancel the policy entirely and take the surrender value cash payment. With this option, you withdraw all of the cash value from the policy, minus any fees taken out, and your coverage ends. However, those “surrender fees” can be significant, especially with a newer policy. That’s one reason why surrendering a policy before retirement age should be considered a last resort, especially if you don’t have other life insurance in place (and in such a case, think about getting a term life insurance quote before signing the paperwork). Also, think about why you’re doing it: if you want to surrender your permanent life policy because of the premium cost, consider using the cash value to cover your premium payments (#4, below).
Withdrawal: In many situations, you can take a cash withdrawal from your permanent life policy, and that money is often not subject to income taxes as long as it’s not more than the amount you’ve paid into the policy.7 However, there are potential disadvantages: your death benefit will likely be reduced, depending on the value of your cash account, and that reduction may be greater than the amount withdrawn, depending on the specific terms of your policy. Talk to your agent or life insurance company to find out how withdrawing money from your specific policy works.
Loans: You can typically borrow money through your policy, although the amount varies. The money does not actually come from your policy but rather from the insurer who then uses your policy as collateral. Life insurance loans include interest payments, but it’s typically a lower rate than you’d get with personal loans or even a home equity loan. There’s no loan application or credit check, and credit rating does not impact your interest rate. You can choose not to repay, but the outstanding loan balance will typically be deducted from your death benefit. A policy loan can be a helpful option if you momentarily need cash but want to keep the full death benefit in force by repaying the loan amount.
Use cash value to pay your life insurance premium: You can typically use the money in your cash value to pay part or all of your policy premiums, making it easier to keep your coverage in place. This is a popular option for older policyholders who want to use retirement income for living expenses but still want to keep life insurance coverage in place.
What if I don’t use my cash value?
After a time, the cash accumulations in a policy can grow larger than the "face value" or death benefit. If you've accumulated cash value that you do not intend to use in other ways, the cash value can increase the amount of death benefit to your beneficiaries instead.
Other advantages of permanent life insurance
Permanent life insurance provides ongoing financial protection for your loved ones, even if you don’t use the cash value. Some policies also offer living benefits, which allow you to access part of the death benefit early, in cases of terminal illness or chronic conditions.
Taking the next step
Thinking about getting a universal life or whole life insurance policy to protect your family and help build your financial future? You should talk things over with someone who can help you decide exactly which type of policy is right for you. A lot will depend on your age, financial situation, family status, and other factors. If you don’t have a financial advisor to discuss insurance with, Guardian can help you learn more about buying life insurance or even find a nearby financial advisor who will listen to your needs and help guide you to a solution.