Ask the Life Insurance Expert

Can I withdraw money from my term life insurance?

No, term life insurance pays a death benefit to your beneficiary if you die within the policy's term. Otherwise, it does not have any cash value.

Only permanent life insurance--such as whole life, universal life and variable life--has a cash value account that grows over time tax-deferred. Permanent life insurance, as its name implies, covers you for your entire life. A portion of the premiums for permanent life insurance go toward building the cash account. Once the policy has accumulated enough cash value, you can use it to pay premiums, or you can borrow against the value. You must repay the loan with interest, or the death benefit will be reduced and your beneficiary will lose out on that money.

Term life is much less expensive than permanent insurance and remains the No. 1 choice for Americans buying life insurance. It provides an affordable way to make sure loved ones are financially secure during the critical years of child-rearing. Generally, you purchase term life to replace your income in case you die prematurely and can no longer provide for your family. Depending on the amount purchased, a term life insurance policy can provide money to pay off the mortgage, fund children's college educations and take care of other crucial expenses.

But term life does not include a cash value account. It's pure life insurance. That means you can't borrow against a term life policy or surrender it for cash.

For more, see The basics of term life insurance.

Last updated: Nov. 7, 2011
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