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I have a whole life insurance policy, should I cash it out? Would I pay taxes on it?

This policy is about 18 years old...I do have a larger term life policy...My premiums are $50 a month...and the cash value is going no where...I could use the cash to pay most of my debt down and I would like to start investing in my deferred at work?

Public Comments

1. That's a very vague question. How long have you had the policy? Do you have sufficient life insurance remaining in force if you cancel the policy? How old are you, and are you still insurable? How much cash value do you have? Would you have to pay a surrender charge? If you need the money, can you take a loan instead? Can you continue to afford paying the premiums? Cashing out a life policy is a very complicated decision, which relies on a lot of factors. As far as taxes go, you should only have to pay tax on the cash values if the amount of cash value exceeds the amount of premium that has been paid into the policy. And you would only have to pay taxes on the amount of the cash value that exceeds the total amount of premium payments. Basically, if you've made a profit on the policy, you'd have to pay taxes on the profit. Edit: Thank you for the additional information. Based upon the details that you provided me, my primary concern would be whether or not you'll still need life insurance coverage after your term policy expires (or renews at a higher, unaffordable premium). To be safe, it's best to assume that you will not be able to afford the term policy at renewal (even though you might be able to...hope for the best, plan for the worst). How many years do you have left on the term? What age will you be when it expires? At that time, can you be sure that you'll have enough assets to pay any of your final expenses or obligations? If you will, then you probably won't need the whole life policy any further and you may be able to better your situation by cashing it out.
2. You need to provide details on why you want to cash it out, how long you've had it, the current premium and cash value and a dozen other things.
3. Any gain you receive from your policy beyond what you've paid into it over the years is taxable as ordinary income. The rest is not. You should be able to call your agent or customer service and get your "taxable gain" within a few minutes. Good luck with your future plans.