In Canada, the cash surrender value of a life insurance policy is taxable if the cash value received exceeds the adjusted cost base. In simple terms the total premiums paid, less the cost of any riders and the net cost of pure insurance. The net cost is a rate using one year renewal term from a government table.
In Canada, borrowing can trigger a taxable gain as can most transfers of ownership. Best to check your options and the consequences before you do.
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.
President, Lane Independent Agency, Southern California
If you decide, for whatever the reason, not to continue your permanent life insurance, and instead decide you want to cancel it and take the money out (cash surrender value), then yes, absolutely, that money is taxable. If, instead, you decide to borrow against that policy, and later decide to keep that money rather than repay the loan, then no, that money is not taxable. So you know what to do. Thank you. GARY LANE.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Please check with your accountant. Normally the surrender value of the policy is subject to income tax only to the extent that it exceeds the premiums paid for it. The company will issue a form 1099 to show the disbursement and report that to the IRS.
That is an excellent question! To put it simply, you have already paid taxes on the money that you have paid into the policy. If the surrender value is equal to, or less than that amount, then there are no taxes on it. If there has been interest, or investment income added to the premiums you've paid in, then that extra amount can be considered as income, and that part taxed. Sometimes it makes more sense to borrow out of the policy, and keep the coverage, and get the cash you need. If you'd like to discuss that further, please feel free to contact me, okay? Thanks for asking!
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In Canada, borrowing can trigger a taxable gain as can most transfers of ownership. Best to check your options and the consequences before you do.
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.