Dan Allen explains four ways to withdraw money from whole life insurance without a loan: surrender the policy, surrender cash-value riders, take dividends in cash, or collect death benefits. Each comes with trade-offs like losing coverage or a reduced death benefit, and taxes apply if you withdraw more than you paid in.
If you're considering taking a whole life insurance policy out, make sure you ask the right questions. Make sure you understand what that contract says, because in there it will answer the question for you as to when and how you can take money out of a whole, that whole life insurance policy without it being a loan. So that's one thing I really wanted you to understand. The contract will dictate the answer to the question that I was talking about. So always know your contract.
Today I'm going to try and answer the question, at what point can you take your money out of a whole life insurance policy without it being a policy loan? Well, that's a great question. And I'm going to speak to four ways that you could take your money out of the policy without it being a loan. Hi, I'm Dan Allen with Ascended Financial and I'm a life insurance broker. So I'm going to try and cover off this question for us today and give you some insight as to when you could take money out of your policy without it being a policy loan. So the first thing I wanted to speak about though was what is a whole life insurance policy? Well, it's a contract. That's right, it's a contract. You're the owner of the contract and it's a contract between you and the life company. Now, as you know about a contract, well, those clauses, those the terms that are in that contract are going to dictate a lot of things. Now a life company is going to be obliged to fulfill the contract as it is written. So you need to understand all the terms and conditions of that contract. Now if you already have one, go and look at it. If you're considering taking a whole life insurance policy out, make sure you ask the right questions. Make sure you understand what that contract says, because in there it will answer the question for you as to when and how you can take money out of that whole life insurance policy without it being a loan. So that's one thing I really wanted you to understand. The contract will dictate the answer to the question that I was talking about. So always know your contract. And yeah, there's lots of jargon goes on in those contracts. It's typical for a legal document, have lots of terminology, make sure you understand it if you don't ask the right questions. All right, so what are the four ways that I want to speak about how you could take your money out of a whole life insurance policy? And again, all these will be conditional on what the contract says. The first one I wanted to speak to is like if there's cash value built up in your policy.
You can ask the life company what is the surrender cash value. And that is the cash value that they would pay you if you surrendered your contract. And that's one way that you could take your money out of the policy without being loan. Now what you want to understand is you've ended that contract once you surrendered it so there's no longer protection on the life of whoever was insured. That is all ended. The life company has paid you the value that they would agree to based on the contract to surrender that policy. So that is one way that you can take out your money without it being a policy loan. Another way is through riders. Now again, this comes down to how your contract was designed and put in place. So if you happen to have.
There'S a few riders that this will happen with. But I'm going to speak about paid up additional death benefit rider. So if you had in your contract a paid up addition death benefit rider, you would be paying for additional death benefit and it will have a cash value and again refer to the contract. But most life companies will allow you to surrender the paid up additional death benefit, maybe just part of it. It's your choice. They'll tell you how much cash value you've got available that you can surrender and you can take that out as cash without it being low. Now again, what I want to remind you of is that that is a.
You give up something. So because what you would do in that circumstance is you would give up some of the death benefit that was there previously. So it's a surrender of something to do that. So just be aware of that. There's other riders too that will build up cash value. And if those riders have cash value, again look at your contract. But those are one other way that you can take money out of a whole life insurance policy without it being a policy loan. But there's always a take and give you taking something, you give something up. So always be aware of that. The other way is if it's dividend paying whole life so that there's dividends coming in on an annual basis and you can choose again goes back to making sure your contract specifies it make sure you've set it up in a way that your dividends can come to you as cash. So on an annual basis when your anniversary date is up. So anniversary date is the date that your policy one year after your policy went in force. Typically that's your anniversary date. You could ask for your dividends in cash and if you did that, it would come out and there would be no policy loan. So again, if you take your dividends out, that's a choice you get to make because you are the owner of the policy and you can make those choices. And you just have to make sure it's part of the contract, make sure you have that right. All the life companies that I work with, they give you that right to take your dividend out if you so choose to. And the other thing that I just wanted to make you aware of is there's times and places. If you take out enough cash out of a whole life insurance policy and it gets above your adjusted cost basis, it may be taxable. So be aware of that too. So that is the third way that you could take money out of a whole life insurance policy. That's if it's dividend paying and you elect to have those dividends come to you as cash. Now, the fourth way is say when the life insured passes away. So that's what life insurance is all about. It's to insure someone. And when that day comes and their life is over, you get the cash value out of the policy without it's going to be the death benefit. It's not going to be the cash value, but you get that money out of your policy without it being a policy loan. Now you might be thinking, well, yeah, but what good does it do me? I just died. Well, no, you don't have to be.
The life insured. You can be the policy owner and someone else can be the life insured. So in that case, when that other person who was life insured passed away, you would get the death benefit. And that's just another way of taking all of the value out of that policy. And it's going to come as tax free. And again, that's not an ideal circumstance, but it is something. And that was the purpose for having it in place for a lot of us was the death benefit. And that is when you would get money out of it and I wouldn't be alone. And the policy, again, at that point the contract would end upon the death of the life insured. So those are the four ways that you can take money out of a whole life insurance policy without a policy loan. But again, I'm always going to tell you, make sure you understand the terminology in the terms in your contract is they will dictate that answer for you. I hope this helps you. Again, if you want more information about how whole life insurance works, we can answer those questions for you. Just look at some of our additional videos that we have related to the product and you can get your answers there. And I just encourage you to also, if you haven't subscribe to our YouTube channel, it's another great way just to get more information about life insurance and the ways we use it and this whole process that we teach people, which is how to become your own banker using dividend pay and whole life insurance as the platform for the process.
