Why Buy Through MoneySmart?In Singapore, you can typically withdraw money only from a permanent life insurance policy—such as whole life or certain endowment plans—if the plan has built up cash value over time.
Term life insurance policies do not accumulate any cash value and cannot be withdrawn or “cashed out.” Withdrawals or loans are a feature of cash value policies (also known as participating policies), while term insurance is designed to provide time-based but not lifetime protection.
Ways to access cash from your policy
If your life insurance policy has built up enough cash value, you have several common ways to use or withdraw funds:
Policy loan:
You can borrow against your cash value.
Pros: Access funds easily without a credit check; the loan is generally not taxable.
Cons: Interest adds up; any unpaid balance (including interest) will be deducted from your death benefit, reducing your family’s payout.
Partial withdrawal (partial surrender):
You can withdraw a portion of the accumulated cash value.
Pros: Get immediate funds without needing to repay.
Cons: Reduces the original sum assured permanently; withdrawals above your paid premiums may be taxable under overseas tax laws.
Full surrender:
You can cancel the policy and receive its current “surrender value”.
Pros: Receives the maximum available cash at once.
Cons: Your insurance cover ends immediately. Beneficiaries will receive nothing if you pass away after surrender. There may be high charges if you surrender early.
Paying premiums with cash value:
Some policies allow you to use your accumulated cash value to help pay ongoing premiums, which can be helpful if you face temporary cash flow issues.
Critical considerations
Waiting period: It often takes several years before a policy builds up meaningful cash value for withdrawal or loans. The exact waiting period differs from policy to policy.
Tax implications: In Singapore, proceeds from personal life insurance are generally not subject to income tax. However, other countries may tax policy gains differently—seek advice if tax residency is a concern.
Protection gap: Any withdrawals or loans that reduce your policy’s death benefit can leave your loved ones with less financial protection, especially if your needs are reassessed later.
Check your latest policy illustration or benefit statement to see your current cash surrender value. Speak with a licensed financial adviser for guidance based on your needs and the trade-offs involved in tapping cash value from your plan.
If you need up-to-date information, you can also contact your insurer’s customer service for the current cash value or to learn more about your withdrawal options.
