what happens when you withdraw cash from life insurance 
if you make a withdrawal from the cash value in a life insurance policy the death benefit will decrease if you withdraw everything the policy terminates withdrawing money from life insurance is tax advantaged in that the irs considers your withdrawals a return of the premiums you paid for the policy so you can withdraw that amount of money without paying taxes any gains from dividends or interest however would be taxed but these would not occur until after you ve withdrawn all your premium payments 4the bottom linecash value life insurance provides a mechanism for policyholders to accumulate funds for future use a portion of each premium is deposited into an interest bearing savings account and the cash value grows tax free over the lifetime of the deposit this cash can be accessed for a variety of purposes during the insured s lifetime 