Principal, LifeNet Insurance Solutions, Redmond, WA
If you surrender a life insurance policy the interest that has been generated within that policy is taxable during that year and you will receive a statement to that effect from the insurance company. One way to avoid tax is to borrow from the cash value. You may borrow without tax as long as the policy stays in force.
In Canada, you are taxed on the policy gain at surrender and certain other events that are considered deemed dispositions. These include borrowing in excess of the policy gain, a partial surrender and most transfers of ownership.
Essentially the policy gain is calculated by subtracting from the cash value the total premiums paid after deducting the cost of insurance and any riders.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
It can be. If the policy being surrendered is a permanent life insurance policy with cash value, the interest that has built up can be taxable. When this happens, the carrier would send you a letter noting the taxable amount.
Talk to your agent before cashing in a life insurance policy. There may be other reasons why you should keep it going or alternatives that are more suitable for your situation. Once you have surrendered the policy, you can't undo it.
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Essentially the policy gain is calculated by subtracting from the cash value the total premiums paid after deducting the cost of insurance and any riders.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
Talk to your agent before cashing in a life insurance policy. There may be other reasons why you should keep it going or alternatives that are more suitable for your situation. Once you have surrendered the policy, you can't undo it.