Policy Owners Last reviewed: 2026-10-03 Part of Cash value

Cash Value Life Insurance: How to Reach It and What It Costs

Written and reviewed by Hans Goldstein, licensed insurance producer, NPN 20602398 · CA Insurance License #4273294
Last reviewed October 3, 2026 · Published October 3, 2026

Editorial review by a licensed agent who may earn a commission. No insurer pays for placement or grades. Hans is paid a commission by the insurer if you buy a policy through him. For life insurance, ask and he will tell you what he earns on your specific policy.

Short answer: cash value is the savings part of a permanent life policy: the money left after premiums pay the cost of insurance and charges, plus interest, dividends or index credits. You can reach it four ways: borrow against it, withdraw part, surrender the policy, or exchange it into another policy or an annuity. Each has a different tax result and a different effect on the death benefit, so pick the route before you need the money.

The four ways to reach cash value

Reaching cash value

Route	Effect on coverage	Tax (non-MEC policy)	Best when
Policy loan	Death benefit reduced by the loan; coverage continues	Generally not taxed while in force	You want cash and to keep the coverage
Partial withdrawal	Reduces cash value and often the death benefit	Basis first; gain over basis taxable	You need a one-time amount and have basis
Surrender	Coverage ends	Gain over basis taxed as ordinary income	You no longer need coverage at all
1035 exchange	Old policy ends; new policy or annuity takes over	Generally deferred	A better contract exists for the same job

Policy loans and withdrawals up to your basis are generally not taxed if the policy is not a modified endowment contract (IRC §7702A) and stays in force; a lapse or surrender with a loan outstanding can create taxable income. Exchanges: IRC 1035.

How long cash value takes

In a well-funded indexed or universal life policy, surrender value often takes 7 to 12 years to pass premiums paid; a minimum-funded policy may never get there. Whole life builds on a guaranteed schedule but also starts slowly. The cash value timeline.

Policy owners

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Decisions owners face

Send your latest annual statement or an in-force illustration to hans@hansgoldstein.com and Hans grades the policy on the Goldstein Index within one business day. Or book 15 minutes.

Send the statement or letter. Get a plain answer.

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Rather talk it through? Or book 15 minutes on Hans’s calendar, or call 213-414-2808.

Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer

Frequently asked questions

What is cash value life insurance?

Permanent life insurance that builds a savings component, the cash value, from premiums after charges plus interest, dividends or index credits.

How can I get money from my life insurance?

Borrow against the cash value, take a partial withdrawal, surrender the policy, or exchange it under IRC 1035. Each has different tax results.

Is borrowing from cash value taxable?

Generally not while a non-MEC policy stays in force. A lapse or surrender with a loan outstanding can create taxable income.

How long does cash value take to build?

In a well-funded IUL or UL, surrender value often takes 7 to 12 years to pass premiums paid. Minimum-funded policies may never pass it.

Should I cash out my life insurance?

Only after comparing a loan, a partial withdrawal and a 1035 exchange, and confirming you no longer need the coverage.

Sources

Hans Goldstein, CA Insurance License #4273294 · NPN 20602398 · Goldstein & Co. LLC dba Goldstein Insurance Services, CA License #6016830

Contact: hans@hansgoldstein.com · 213-414-2808

General education, not tax or legal advice. Tax treatment depends on your facts and on current law, which can change. Talk to your CPA or estate attorney. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Guarantees apply only to the contractual terms of the policy. Caps, participation rates, loan rates, charges and dividends are not guaranteed and can change. Hans is paid a commission by the insurer if you buy a policy through him. For life insurance, ask and he will tell you what he earns on your specific policy. Product and company names are trademarks of their owners. Goldstein Insurance Services is an independent agency, not affiliated with or endorsed by any insurer named here. Life insurance requires underwriting; not everyone qualifies. This page describes products in general terms; read the policy and the insurer's disclosures before you buy.