Using Your Cash Accumulation Account Funds
The cash accumulation accounts becomes a part of your death benefit if there was no cash surrender. The listed beneficiary on your policy would receive both the policy value amount as well as the cash accumulated, increasing the total amount of the death benefit.
📌 The added bonus to cash accumulation accounts is that you can access them during your lifetime. There are two ways to access and use the funds in your accumulation account: a surrender or a loan.
Taking out a Loan
Taking out a loan against a life insurance policy is the most common method by which people use their savings. When you take out a loan from the cash accumulation account, you do so with terms much like any other loan, by which you must repay the amount into the account by a certain date.
The biggest benefit to taking out a loan is that you can keep the tax-deferred status of the amount in the account. That means that you will not be taxed on the money as income. It also means that once you have paid back the loan you can continue to earn interest on that amount, as well as other cash put in the account from the premiums you continue to pay.
📌 Surrendering the Cash Account Accounts.
A surrender is the second option for taking money out of the account. It is not a loan and you don’t have to pay it back. You simply take the money, empty the account, and the start over adding money to the account. When you take out the money as a surrender you will have to pay taxes on that amount since it is treated as income and not as a loan.
It’s important to note that whether you decide on a loan or a surrender, you may not be able to access all of the money, or any of it, early in the policy’s term. It takes a while for the cash to accumulate, and most policies have rules as to how much you can actually take out and when it becomes available to you as a loan or surrender.