Build and protect your assets with life insurance from New York Life. As your policy accumulates cash value, you can borrow against the cash value to cover significant expenses, like a down payment on a home.
Typically, when the policy owner dies, the policy owner’s beneficiaries receive the death benefit. However, in certain instances, if there is no longer a need to pass the death benefit on to beneficiaries, the policy owner can choose to access the accumulated cash value while still alive, either by surrendering the policy entirely or by making smaller withdrawals or taking out policy loans. (The cash value of permanent life insurance generally grows federal income tax-free.) Accessing the cash value through policy loans or partial surrenders will reduce the total cash value and total death benefit
The death benefit provides cash to your beneficiaries when you pass away, plus you get potentially tax-free access to your cash value while you’re alive. This is cash that can be used to help fund your children’s college education, to assist with a down payment for a home, to supplement retirement income, or to help pay for anything else you need.
You can also borrow against the cash value to buy a house or pay for your children's college costs, tax free. Of course, accessing the cash value will reduce the available cash surrender value, and possibly the life insurance benefit, but it’s comforting to know that this resource is there if you need it.
The cash surrender value (cash value minus any fees and charges) is the sum of money an insurance company pays to a policy owner or an annuity contract owner if the policy is voluntarily terminated before its maturity or before an insured event occurs. Cash value is the amount of equity in a policy against which a loan can be made3.
The cash value growth in a whole life policy is guaranteed4, and it grows tax deferred. Dividends, if declared, may increase the cash value growth even more. You can pay higher premiums for fewer years or you can pay lower premiums for more years5.
The policy’s cash value can be accessed during your lifetime through loans or surrendering any paid-up additional insurance. You can borrow up to the maximum loan value from your policy’s cash value through policy loans, generally on a tax-free basis 3.
You can receive your cash value on an annual or monthly basis through an automatic deposit into your bank account or in the form of a check. Loans or surrenders will reduce the cash value and death benefit. Loans incur interest. Please keep in mind that accessing the cash value presupposes that you’ve made a long-term commitment to keeping the policy inforce and therefore that sufficient cash value has accumulated.
A whole life policy provides living benefits as well. If your death benefit needs change, you can take a loan or withdraw a portion of the cash value to supplement various financial needs such as helping pay college tuition7. You can borrow or withdraw money from your cash value whenever you like. There’s no approval process, and any money you take out is usually income tax free.3
Both universal life and variable universal life policies have a cash value feature. Whole life policies are credited a guaranteed cash value after the second policy anniversary, unless there are paid-up additions purchased with the whole life policy, in which case there may be an immediate cash value.
Some cash value surrenders are subject to taxes. When you surrender a life insurance policy for its cash value and the amount of cash value taken out is larger than the amount of premiums paid into the policy (also known as the cost basis), that is called a gain. The gains in the policy are subject to taxes. Also, if a life insurance contract is over-funded, it is deemed a modified endowment contract, and distributions are taxed in that scenario, too. Our agents work carefully with clients to understand their needs and avoid these scenarios7. Please consult your own tax or legal advisor for advice pertaining to your specific situation.
You can borrow at any time if the policy has a cash value.
Yes, cash can be accessed via loans or surrenders 2,3.
No, term life insurance does not have any cash value.
When a policy is surrendered, it means that the life insurance benefit no longer exists, and that New York Life will no longer pay a life insurance benefit when the insured dies. New York Life pays the client the cash surrender value of the policy. This payment may be subject to taxes and charges, as explained earlier.
The calculation depends on the type of policy. For whole life policies, the guaranteed cash value will equal the face amount at age 100; this is called policy endowment. The guaranteed cash value is discounted using specific interest rates and assumptions to arrive at the cash value in any given year. If a dividend is paid on a policy and the dividend is used to purchase paid-up additions, those additions also have a cash value. We call that cash value the non-guaranteed cash value. If a policy is surrendered for its cash value, the outstanding loans and interest are subtracted from the cash value.
Cash value accumulates tax-deferred, and it can serve as a readily available source of funds for any number of life’s significant events. You can borrow from your policy’s accumulated cash value by taking a loan at a competitive interest rate. You can use these funds any way you wish — to make a down payment on a home, to finance a new car, or even to start a business.
1 Cash value is guaranteed to accumulate at a given minimum rate; there is also a nonguaranteed rate that is higher—but not guaranteed.
2 Any guarantees of the policy are based on the claims-paying ability of the issuer
3 The total outstanding loan balance (which includes accrued loan interest) reduces your policy’s available cash surrender value and life insurance benefit. The amount you borrow will accrue interest daily. Any loan interest that you do not pay when due will be added to the policy's outstanding loan principal and will also accrue interest daily.
If your policy lapses, or if you surrender it while you have an outstanding policy loan, you may be liable for federal or state income taxes if the value of the outstanding loan plus your cash surrender value is more than the total amount of premiums you have paid into your policy (less certain non-taxable distributions). New York Life will report any taxable gain to you, the Internal Revenue Service (IRS), and any applicable state taxing authorities. Please be sure to discuss this with your tax advisor
4 Accessing the cash value will reduce the available cash surrender value and the death benefit.
5 The guarantees of a whole life policy are based on the claims-paying ability of the issuer.
6 Dividends are not guaranteed
7 Accessing the cash value through policy loans or partial surrenders will reduce the total cash value and total death benefit. Loans also involve interest payments
8 Certain tax advantages are no longer applicable to a life insurance policy if too much money is put into the policy during its first seven years, or during the seven-year period after a “material change” to the policy. If the cumulative premiums paid
Guarantees of the policy are based on the claims-paying ability of the issuer. Accessing the cash value of the policy will reduce the available cash surrender value and total death benefit
Oregon Policy Form Numbers for New York Life Whole Life: New York Life Insurance Company is the issuer of New York Life Whole Life. In Oregon, the Whole Life policy form number is ICC18217-50P (4/18). SMRU # 1891275 (10-27-2023)