I have a whole life policy. My annual premium is 855. According to my schedule, the value upon surrender is 7320. Does this mean that if I cancel my policy, I will be paid 7320? Further more, would this be taxed heavily? I would think not since I did not get a tax break when I made my premium payments. If I withdrew money from a savings account, I would not be taxed on that, right?

 

  • Michael M 5:01 pm on February 12, 2010

    You would receive the surrender value assuming that this is a guaranteed whole life policy and assuming that you haven’t made any previous withdrawals or loans.

    As someone else stated, you will only be taxed on the surrender value less the amount of total premiums you have paid. So the amount taxes you would pay would be:

    $7320

    less

    $855 multiplied by (# of payments)

    Multiplied by

    (Your tax rate)

    Most whole life policies don’t have high enough returns to create huge interest gains.

  • seaportma 5:01 pm on February 12, 2010

    By way of a crude explanation, a whole life insurance policy combines life insurance with a savings program.

    There should be a table — but the surrender value is what you would get if you quit the policy. The longer you keep the policy, the more premium you pay over the course of years, the higher the cash surrender value.

    In terms of taxes, anything you get in excess of premium payments made can be taxed because it was accumulated in a tax deferred basis. (eg. If you paid $4,000 in premiums over the years, and the surrender value is $5,000, you would pay tax on $1,000.)

  • jana 5:01 pm on February 12, 2010

    I have no idea. But call me if you withdraw your money.. ehhehe Lets get party!!!!!!

  • Pompad 5:01 pm on February 12, 2010

    Don’t cancel first of all, because you can borrow from it, You would lose the total amount of the insurance policy. Yes,you would be tax heavy on it. I did not know how old you are or how long you have had the policy???

  • mbrcatz17 5:01 pm on February 12, 2010

    Tax is only if you have a gain – if you get out more than you paid, in premiums.

    On that surrender value, you’re going to have to call the company and check, it changes (increases) every month you keep the policy. If you haven’t held this a few years, you’re not going to get any money back.

  • ds 5:01 pm on February 12, 2010

    Don’t mess with life insurance if you don’t have to. You can change policies and payments if needed. Taxes will override the original value and payments if you take it out early.