Redeeming Your Life Insurance: How to Do It and Best Practices 

Life insurance isn’t just about protecting your loved ones when you’re gone—it can also be a valuable financial tool while you’re still here. If you own a permanent policy like whole life or universal life, chances are it’s been building cash value behind the scenes. At some point, you might ask yourself: “Can I access that money—and should I?” 

The short answer is yes—you can. But how you redeem your life insurance, and whether it’s the best move for your financial future, requires a little strategy. Let’s walk through your options, best practices, and a simple step-by-step process to get started. 
 

Your Options for Accessing Cash Value  

When it comes to tapping into life insurance, you have three main routes:

1. Policy Loans 
   Think of this like borrowing from yourself. You’re tapping into the cash value with no credit check or lengthy approval process. You’ll pay interest, but as long as you repay, your death benefit remains intact.
2. Partial Withdrawals 
   This allows you to take money out while still keeping your policy. It’s often tax-free up to the amount you’ve paid in premiums. Just remember—every withdrawal lowers the death benefit left for your beneficiaries.
3. Full Surrender 
   This means cashing in your policy entirely. You’ll get the cash surrender value (minus fees), but coverage ends. For some, this makes sense if the policy no longer fits their needs, but it’s a big step.  

Need help figuring out which option fits your situation? Talk with an Ansay life insurance specialist today. Connect with us here.

Best Practices Before You Redeem

Before you make a move, slow down and think strategically. Life insurance is a long-term tool, and dipping into it too soon or in the wrong way can have lasting effects. 

• Review your policy illustration. This will show you exactly how a loan, withdrawal, or surrender will impact your cash value and death benefit.
• Understand taxes. Withdrawals are generally tax-free up to the premiums you’ve paid, but gains could be taxable. Loans are usually tax-free as long as the policy stays in force.
• Think long-term. If this is just a short-term need, a loan might make more sense than a surrender. If your policy has built value for decades, it may be worth preserving.
• Consider alternatives. Could a personal loan, home equity line, or tapping other assets help you instead? Sometimes it’s better to leave your life insurance untouched. 

Want a second opinion? Ansay’s advisors can walk you through the pros and cons—and help you avoid costly mistakes. Let’s review your options.

How to Redeem Step by Step 

Ready to move forward? Here’s a quick guide to the process: 
 
Step 1: Gather your paperwork. Pull your policy contract, statements, and beneficiary details. 
 
Step 2: Contact your agent. With Ansay, you can reach out directly to your agent or use our online tools to see available options. 
 
Step 3: Submit your request. Whether you’re taking a loan, partial withdrawal, or full surrender, your insurer will need the proper forms. 
 
Step 4: Confirm the details. Make sure you know the repayment schedule (for loans), tax implications, and how your coverage will change. 
 
Step 5: Plan next steps. If you’re surrendering, consider whether converting to a smaller paid-up policy or exploring a life settlement could be beneficial. 
 

Final Thoughts 

Redeeming your life insurance isn’t something to take lightly. For some, it’s a smart financial move that provides flexibility and peace of mind. For others, it could create unexpected tax bills or leave family members with less protection. 
 
The best approach is to understand your options, think long-term, and work with an experienced advisor who can help you navigate the fine print. 
 
At Ansay & Associates, we’ve been guiding families and businesses across Wisconsin for decades—and we’re here to help you make the most of your life insurance, whether that means tapping into it now or protecting it for the future. 
 
Ready to explore your options with confidence? Talk to an Ansay advisor today!