Using Life Insurance While You’re Alive

• Life insurance can benefit you while you’re alive, not just your beneficiaries after you pass away.
• With a permanent life insurance policy, you can borrow from or withdraw against your policy’s cash value.
• Some policies let you use a portion of your death benefit for medical or long-term care expenses.
• Using life insurance while alive can reduce your death benefit and may trigger taxes if you withdraw more than you paid in premium.

Yes, but it depends on your policy. Most permanent life insurance policies build cash value over time, which you can access while you’re alive through loans or withdrawals. 

Some policies also include living benefit riders, also called accelerated death benefit riders, that allow you to use part of your death benefit if you face a chronic or terminal illness.

Which Types of Life Insurance Allow Use While Alive

Permanent policies such as whole life and universal life build cash value that you can access during your lifetime. You can use that money for major expenses like healthcare, debt repayment, or supplementing retirement income.

Term policies, on the other hand, don’t accumulate cash value. The only way you can use your term coverage if you’re living would be if your policy included a living benefit rider that allows access to funds under specific conditions, like a serious qualifying illness.

Read: Are Life Insurance Premiums Tax Deductible

1. Take a Partial Withdrawal from Your Cash Value

If you own a permanent policy, part of your premium builds cash value over time. Once enough has accumulated, you can withdraw from it to cover expenses such as a down payment, education costs, or as a supplement to retirement income.

Withdrawals are only possible after your policy has built sufficient value, usually over several years. They also reduce your death benefit, and any amount withdrawn beyond what you’ve paid in premiums may be taxable

2. Borrow Against Your Life Insurance Policy

A policy loan lets you borrow against your cash value without the paperwork or credit check of a traditional loan. You’ll pay interest, but repayment terms are flexible.

Be sure to make payments, because unpaid loan balances and interest reduce your death benefit. If the loan balance ever exceeds your cash value, your policy could lapse.

3. Pay for Medical or Long-Term Care Expenses

If your policy includes a living benefit rider, you may be able to access part of your death benefit while you’re alive if you’re diagnosed with a qualifying chronic, critical, or terminal illness. (Qualifying illnesses vary by insurer.)

These funds can help pay for long-term care, home assistance, or medical treatment, though any amount you use will lower what your beneficiaries receive later.

4. Surrender the Policy for Its Cash Value

You can also choose to cancel your permanent policy before it matures and receive its cash surrender value, which is your accumulated cash value minus surrender charges and outstanding loans.

Surrendering your policy can provide immediate cash, but it also ends your coverage and may create a tax liability if you receive more than you’ve paid in premiums. It’s best suited for those who no longer need the protection.

5. Use Cash Value to Pay Premiums

If you’re facing financial hardship, some policies allow you to use your accumulated cash value to pay premiums. This can keep your coverage active without out-of-pocket payments.

Just make sure the remaining cash value is enough to sustain your policy; if it drops too low, your coverage could lapse.

Read: Can You Sell Your Life Insurance Policy If You Are Under 65

Pros

• Provides flexible access to cash without credit checks or lengthy approval.
• Can cover emergency expenses, medical needs, or retirement income gaps.
• Offers short-term financial relief without immediately canceling your coverage.

Cons

• Withdrawals and loans reduce your policy’s death benefit.
• Unpaid loans or interest can cause your policy to lapse.
• Withdrawals or surrenders may create taxable income if gains exceed premiums paid.

Read: How Long Does It Take For A Beneficiary To Receive Money

Whether it makes sense depends on your goals, financial situation, and how much you still rely on the death benefit. Using your policy while you’re alive can be useful, but it also reduces your long-term protection.

When It Might Make Sense

• You’ve built substantial cash value.
• You need funds for medical expenses or long-term care.
• You want to supplement retirement income.
• You own multiple life insurance policies.

When To Leave Cash Value In Place

• Your beneficiaries still rely on your death benefit.
• Your policy is new and hasn’t built enough cash value.
• You’re using it as part of an estate plan.

Read: Why Did My Life Insurance Premium Go Up

• Not all life insurance policies build cash value, only permanent policies do.
• Using your policy doesn’t automatically mean losing value; when used carefully, it can be a flexible financial tool.
• You don’t always owe taxes when you withdraw money. Taxes apply only if your withdrawal or surrender value exceeds your total premiums paid.