How can a policyholder typically access their cash value?

A policyholder can typically access their cash value through loans or withdrawals against the policy. This mechanism allows the insured to tap into the accumulated savings within a permanent life insurance policy, such as whole or universal life insurance, without losing their death benefit.

When a policyholder takes a loan against the cash value, they are essentially borrowing from the insurance company with the cash value serving as collateral. They can generally choose how much to borrow and can repay the loan at their discretion, although any unpaid loan balance will reduce the death benefit.

Withdrawals also provide access to cash value, allowing policyholders to take out a portion of the cash value directly. However, it’s essential to note that withdrawing cash can decrease the total death benefit and may have tax implications, particularly if the amount withdrawn exceeds the amount paid in premiums.

This method of accessing cash value is a significant advantage of whole and universal life policies, providing flexibility and financial support for emergencies or other needs without the necessity of surrendering the policy entirely, changing insurers, or waiting for maturity.