If you withdraw the money any amount over what you have paid in premiums is taxable.
If you loan out the money it is not taxable as long as the policy is still in force. You have to be carefull not to take out too much in a loan or it will implode the policy. Talk to your agent or the company to find out the max loan amount available while still keeping the policy in force.
Most people withdraw up to what they have paid in, and then loan out the rest.
If the cash value grows too large compared to the death benefit it becomes a MEC or modified endowment contract, and is then subject to a 10% tax. A good agent who is knowledgable in designing a policy will be able to keep this from happening.
Finally, be aware that a policy loan is not free. That is, the policy will prescribe the interest rate at which the loan is made. While it is generally less than the market rate of interest would be for a commercial or personal loan, you will end up paying back more than you borrow, or the dividend that you might otherwise receive (in the case of a mutual company) may be less to account for the interest on the loan. Check the terms of the policy for details. If the loan is not repaid prior to the time of death, the loan balance, including accrued interest, will be deducted from the death benefit.
"Insurance and Taxes. No. All proceeds or withdrawals from any insurance policy are not taxable." This is not true. If you cancel a life insurance policy, the growth on the cash value IS TAXABLE. If you do not surrender your policy, the money is taken as a loan and therefore not taxable, but interest that has to be paid back to the insurance company grows.
As a general rule, life insurance proceeds from any type of policy are not taxable to the beneficiary. In addition, any loans from cash value are not taxable unless the policy lapses.
You are talking about Paid up additions. No they are not. Proceeds in cash value are not taxable as long as the cash value does not exceed the amount of premiums paid.
In India, cash value of a life insurance policy at death is totally tax free u/s. l0 l0(D) of Income Tax Act, l96l.
It normally isn't a taxable event. If it needs reporting the insurance co should have sent uyou a 1099.
Life insurance death benefits are paid out tax-free as long as your premiums were paid with after-tax money. If you have a cash value life insurance policy and surrender the policy, you may be subject to a taxable gain if the total cash value exceeds the cost basis of the policy.
Not all insurance policies have cash value. Term life has no cash value. Whole life does have cash value. You will have to talk to your insurance company and tell them what you want. If you have a whole life policy with cash value, then withdrawing that cash is essentially like taking money out of a bank account; very simple.
Cash value of whole life insurance is referred to as the "Cash Surrender Value". The cash surrender value is money the policyholder is supposed to receive from the insurance company when surrendering the whole life insurance policy with cash value. The cash surrender value amount due is the sum of the cash value stated in the whole life insurance policy minus any surrender charge and any outstanding loans and interest due on the loans.
No, generally speaking, no term life insurance policies have cash value.
if they are death benefit proceeds no. if it is cash value proceeds then any withdrawals over the premiums paid are taxable, any loans on the cash value are not taxable. if it is a hybrid/combo life/long term care policy, then no they are not. all of this is assuming that the policy was paid with after tax dollars, not pre tax.
No. That's why the proceeds aren't taxed as income. Answer Correct...premiums are taxable. Death benefits are generally not taxed as income. Also if it is permanent life insurance policy and has some cash value built up and you take that cash out, the amount of cash less the premiums paid into the policy ("your gain") is taxable. Additional comment: Actually, if you take your cash value out as a loan, you do not have to pay taxes on "gains" as long as the life insurance is in place, hopefully until you die.
No. Life insurance benefits are not eligable for taxation unless the insured passed away without assigning a beneficiary. In this situation the benefits are paid into the deceased's estate and are subject to any back taxes or child support owed by the deceased, or the would be inheritor. Cash value is not the same as an insurance benefit and may be taxable in some situations. Group (employment) insurance has no cash value.