Permanent life insurance policies increase in value as the insured gets older. If the insured continues paying the premium, the policy will never cancel and death benefits will be paid out to the insured's beneficiaries when he dies. Often though when someone experiences financial hardships, life insurance, because it is intangible and makes people feel invincible, is one of the first bills they stop paying. If they own a term life insurance policy, the policy will cancel for nonpayment. If they own a permanent life policy, however, there is a way to surrender, or cash out, the policy.
Step 1
Verify your policy is a permanent life policy. According to the Insurance Information Institute, permanent life insurance policies include whole life, universal life, variable life and universal/variable life. Unlike term life insurance, which does not build up a cash value, permanent life insurance policies build a cash value within the policy that can be borrowed against or cashed out.
Step 2
Review your life insurance illustration. Your life insurance illustration can be found in your original permanent life policy and will list the cash value for each year you have paid into the policy. If you are unable to locate your original lie insurance illustration, contact the company that issued your policy and request a replacement.
Step 3
Request a form from your life insurance company's service center to cash out your policy. This form will be sent to you and will need to be completed and signed in front of a notary public.
Step 4
Select a non-forfeiture option. When cashing out a permanent life insurance policy there are basically three options you can choose from:
1) Take the cash and do with it what you wish. The cash value is listed in the life illustration and the policy can be surrendered for that value.
2) Purchase reduced paid up life insurance. With this option, the cash value is used to purchase a reduced death benefit that is fully paid up. No future payments are necessary on the policy.
3) Purchase extended term life insurance. The full death benefit will be paid if the insured dies within a specified term. If the insured survives that term, the policy will not pay.
Step 5
Return the notarized cash out form to your insurance company and await your check, if you chose the cash option, or your new policy, if you chose to purchase reduced paid up insurance or extended term insurance.
Things You'll Need
- Policy surrender form
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