- When you buy a whole life insurance policy, it is designed to be a permanent type of life insurance. However, the policy is not truly permanent as it most likely has a maturity date. Once you reach the maturity date, the insurance company will pay out the face value of the policy. The maturity date is related to your age and typically is not reached until you turn 100 or 125, so few people actually reach the maturity date. If you do reach this date, the policy will pay out.
- When you reach the maturity date of your whole life insurance policy, it pays out the face value of your policy. This is not the same amount of money as the cash value for your policy. The cash value is based on the amount of money that you have paid in and the returns of your investments. The cash value is usually less than the face value of the policy. The face value is also the amount that is paid to your beneficiaries if you pass away.
- Although the face value of your policy will be paid out once the policy reaches maturity, you do not have to wait until maturity to access the cash value. When you have a whole life insurance policy, you can access the cash value in one of two ways. Canceling the policy or taking out a policy loan will allow you to gain access to the cash value of the policy. This makes it possible to access the money before you are too old to enjoy it for much longer.
- When it comes to accessing the cash value or the face value of a life insurance policy, you should not have to worry about any tax implications. Life insurance payouts are not taxable as they are not a way to profit. Life insurance payouts are meant to compensate your loved ones or to let you get back the money that you have already paid in premiums. Neither of these creates a taxable event.
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