Can you cash out a life insurance policy?

Only permanent policies, whole life and universal life, build cash value you can access. Term life is pure protection with no cash value, so there is nothing to cash out at the end of the term.

If you have a permanent policy, the cash value grows over time and you can surrender the policy to receive it, minus any surrender charges and outstanding loans.

Before surrendering, consider borrowing against the cash value, which keeps coverage in force while you use the money. You can also reduce the death benefit to lower premiums, or take a partial withdrawal if the policy allows it.

A life settlement, selling the policy to a third party, can pay more than the cash value for an older policy you no longer need, though it ends your coverage and the buyer becomes the beneficiary.

Money you contributed is returned tax-free, but any growth above your total premiums is taxable as ordinary income when you surrender. If the policy was set up for estate planning, cashing out can also change your estate picture, so check with a tax advisor for large policies.