Home Life insurance Life insurance questions Can you cash in a life insurance policy to pay off debt? Can you cash in a life insurance policy to pay off debt? Written by Barbara Marquand | Updated on: July 18, 2023 Why you can trust Insure.com Quality Verified At Insure.com, we are committed to providing the timely, accurate and expert information consumers need to make smart insurance decisions. All our content is written and reviewed by industry professionals and insurance experts. Our team carefully vets our rate data to ensure we only provide reliable and up-to-date insurance pricing. We follow the highest editorial standards. Our content is based solely on objective research and data gathering. We maintain strict editorial independence to ensure unbiased coverage of the insurance industry. First, does your insurance policy have cash value? Term life insurance, which insures you for a certain period, such as 10, 15 or 20 years, pays a death benefit to your beneficiaries if you die within the term. Otherwise, it has no cash value. Only permanent insurance–such as whole life, variable and universal life–has a cash account that accumulates over time. The cash value is not the same as the death benefit paid to beneficiaries. However, withdrawing cash can reduce or eliminate the death benefit. You can borrow against the cash value, and, as long as you pay back the loan with interest, still maintain the death benefit. Or you can surrender the policy for the cash. You may pay a surrender fee. The cash value is a strong selling point for permanent life insurance. However, know the consequences before tapping into the policy. The question of whether you should use life insurance to pay off debt draws mixed reactions from financial experts. It might make sense to take out a loan against the policy–which usually has an ultra-low interest rate–to pay off credit cards with double-digit interest rates if you have no other financial means and are in a real jam. Make sure you repay the loan from the policy, though, or the death benefit will be reduced and your heirs may not have the financial protection they need. Some experts advise against taking money out of the policy if you’ve been sued or have judgments against you. Life insurance generally is protected from creditors, but creditors could seize the money if you take cash out of the policy. Consider the loved ones you want to protect with life insurance before you take any action. For more, see When is it wise to take cash from your life insurance policy? × Get Free Life Insurance Quotes Today! Zip Code Please enter valid zip Age Age 16 – 20 21 – 24 25 – 34 35 – 44 45 – 54 55 – 64 65+ Coverage Amount Coverage Amount $50,000 – $100,000 $100,000 – $200,000 $200,000 – $300,000 $400,000 – $500,000 $500,000 – $1,000,000 $1,000,000 – $2,000,000 $2,000,000 – $5,000,000 $5,000,000+ Coverage Type Coverage Type Whole Life Term Life Final Expense Not Sure Gender Gender Male Female Non-Binary Tobacco Use Yes No Compare Quotes QuickTake Can a spouse override a life insurance beneficiary? When is it wise to take cash from your life insurance policy? How do beneficiaries file a life insurance claim? Can you dispute a life insurance beneficiary? Faking death to collect life insurance money: How common is it? See more > Related Articles What happens to the cash value of my whole life insurance policy when I die? By Nupur Gambhir Can you cash in a paid up life insurance policy? By Les Masterson Can someone take out a secret life insurance policy on you? By Desiree Ghazi Can you change the coverage of your term life insurance? By Insure .com Can I withdraw money from my life insurance policy? By Desiree Ghazi How can I get life insurance if I’m in poor health? By Desiree Ghazi ZIP Code Please enter valid ZIP See rates