Should I withhold taxes when surrendering/cancelling my life insurance policy?

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I switched insurance companies and am cancelling my life insurance policy with the old company since I started one with the new company. (New insurance policy began on March 1st 2017) I am filling out a form from the old insurance company to surrender my old policy. Is it best to withhold taxes on this or not? I started the old policy on 12/11/2014 and its current face value is $46,808.00. I have been paying $11.64 a month for this policy. Thank you”

Asked April 13, 2017

1 Answer


Whether or not you should withhold taxes when surrendering/canceling your life insurance policy depends on your specific situation. Generally, if you cancel a life insurance policy and receive a payment that is greater than the amount you paid in premiums, you may be subject to taxation on the excess amount as income. However, if you are surrendering/canceling a life insurance policy and receiving a payment that is less than the amount you paid in premiums, you may not owe taxes on the payment. It's important to note that surrendering/canceling a life insurance policy can have other financial implications, such as surrender charges or fees, loss of coverage, and potential tax penalties for early withdrawals if the policy was used as a savings vehicle. It's recommended that you consult with a financial advisor or tax professional before making any decisions regarding surrendering/canceling a life insurance policy and withholding taxes. They can provide guidance on the tax implications and help you determine the best course of action based on your individual circumstances.

Answered April 19, 2017 by midtermquote

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