Cashing Out Aig Life Insurance: A Step-By-Step Guide

Life insurance policies are often intended to last a lifetime, but there are ways to cash out your policy early. Cashing out your life insurance policy can be done in several ways, including taking out a loan, making a cash withdrawal, or surrendering your policy. Each method has its own pros and cons, and it's important to carefully consider the potential tax consequences and other financial implications before making a decision.

One option is to take out a loan against the cash value of your policy. This can provide flexible access to extra cash, often with low interest rates and no credit check. However, interest will accumulate on the outstanding balance, and if the balance exceeds the cash value, your policy could lapse. Withdrawing cash directly from the policy is another option, but this may result in tax consequences if you withdraw more than your total premiums paid or if you take out money during the first few years of the policy.

Finally, you can choose to surrender your policy, which means cancelling it and receiving the full cash value. This option may incur surrender charges, and you will no longer have life insurance coverage. It's important to remember that cashing out your life insurance policy early could compromise your long-term financial goals or your family's financial future, so it's recommended to consult a financial advisor before making any decisions.

Cancelling AIG life insurance

Cancelling an AIG Life Insurance Policy

Step-by-step Guide:

• Call AIG Life Insurance Customer Service: The first step to cancelling your AIG life insurance policy is to get in touch with their customer service team. You can reach them by calling 0345 600 6820 or 020 8915 1445. Their operating hours are Monday to Thursday, 8:30 am to 6:00 pm, and Friday, 8:30 am to 5:30 pm, excluding UK bank holidays.
• Provide Your Information: When you call, make sure to have your policy number and customer information ready. Your policy number usually starts with a "P" followed by nine digits. Providing this information will help the customer service representative locate your policy and assist you with the cancellation process.
• Speak with a Representative: Ask to speak with a representative who can handle your cancellation request. They will guide you through the process and address any questions or concerns you may have.
• Request Cancellation: Clearly state that you would like to cancel your life insurance policy. Explain your reasons for cancellation and confirm the effective date of cancellation. Make sure to get all the necessary information about any fees, refunds, or other implications of cancelling your policy.
• Ask for a Confirmation: Before ending the call, request a confirmation of your cancellation. This can be in the form of an email, letter, or any other documentation that provides proof of your policy cancellation. This confirmation will ensure that your request has been processed and your policy is no longer active.

Alternative Methods:

In addition to calling, you can also cancel your AIG life insurance policy through other methods:

• Email: You can send an email to [email protected] or [email protected] to request the cancellation of your policy. Include your policy number, customer information, and any other relevant details in your email.
• Postal Mail: If you prefer, you can also cancel your policy by writing a letter and sending it to the following address: AIG UK, The AIG Building, 2-8 Altyre Road, Croydon CR2 2LG.
• Online: If you have an online account with AIG, you may be able to cancel your policy through their website or mobile app. Log in to your account and look for options related to policy management or cancellation. However, this option may not be available for all types of policies or in all regions.

Remember that cancelling your life insurance policy is a significant decision that can impact your financial planning and protection for your loved ones. Before proceeding, carefully review the terms and conditions of your policy, including any fees or penalties associated with early cancellation. It is also advisable to explore alternative options, such as reducing your coverage or premium amount, if your circumstances have changed.

Cashing out whole life insurance

Taking a Policy Loan

Whole life insurance policies allow you to borrow money at low rates with no credit check or fixed repayment date. Interest does accumulate on your outstanding balance, and if it exceeds the cash value, your policy could lapse. This may result in a taxable event if the policy is cancelled. Therefore, careful management of the loan is crucial.

Withdrawing Cash

You can withdraw cash from your whole life insurance policy, but this may result in tax consequences if you withdraw more than your total premiums paid. Withdrawals can also reduce your cash value and, subsequently, your death benefit.

Surrendering the Policy

If you no longer need coverage or don't want to continue paying premiums, you can surrender your policy to terminate it and receive the cash value. Surrender charges may be deducted from the cash value, especially if you surrender the policy during the early years. Additionally, you may owe taxes on interest earnings.

Life Settlement

Another option is to sell your policy to a licensed life settlement company, which will then keep the policy active and receive the death benefit upon your passing. This option may require more work but could result in a larger payout than a policy surrender.

Before cashing out your whole life insurance policy, it is recommended to consult a financial advisor or tax professional to understand the potential benefits, drawbacks, and tax implications of each option.

Borrowing from your policy

Borrowing from your life insurance policy is a way to access much-needed funds. This option is available for permanent life insurance policyholders who have accumulated cash value in their policy over time. This cash value is essentially what your policy is worth and acts as a savings component for the policyholder.

If you have a cash-value life insurance policy, you can borrow money from your insurance provider using your cash-accumulation account as collateral. The amount you can borrow depends on the value of the policy's cash-accumulation account and the contract's terms. Generally, less value will be available during the early years of the policy.

It's important to note that borrowing against your life insurance policy has its advantages and disadvantages. One benefit is that you are not obligated to qualify financially for the loan. Additionally, borrowed amounts from non-modified endowment contract (MEC) policies are not taxable. You also have the flexibility to pay off the loan on your own terms or leave the debt to be settled when the policy terminates.

However, there are some downsides to consider. Loan balances generally reduce the policy's death benefit, meaning your beneficiaries will receive less. Additionally, an unpaid loan that is accruing interest can reduce your cash value, potentially causing the policy to lapse if insufficient premiums are paid to maintain the death benefit. Therefore, it's crucial to carefully review the terms and conditions of your policy before deciding to borrow against it.

AIG offers permanent life insurance policies such as Whole Life Insurance, which builds cash value over time at a locked-in rate, and Universal Life Insurance, which provides flexible coverage and cost-effective rates for a lifetime. These policy options can provide you with the opportunity to borrow against your policy if the need arises.

Surrendering your policy

To surrender your AIG life insurance policy, you can contact the company by phone or online. To cancel your policy by phone, follow these steps:

• Call AIG life insurance customer service at 800-888-2452.
• Provide the representative with your policy number and customer information.
• Inform the representative that you wish to cancel your AIG life insurance policy.
• Request a confirmation email containing the cancellation details of your policy. Make sure to keep the email for your records.

To cancel your AIG life insurance policy online, follow these steps:

• Access the AIG login from a web browser and sign in with your ID and password.
• Initiate a secure message to customer service.
• In the message, inform customer service of your intent to cancel your AIG life insurance policy.
• Request a confirmation email containing the cancellation details of your policy. Be sure to save the confirmation email so you have proof of your life insurance cancellation.

Before surrendering your AIG life insurance policy, consider the following:

• Surrendering your policy means giving up the right to the death benefit. If you want to replace the lost death benefit later, getting the same coverage may be more complicated or more expensive.
• Surrender fees: If you surrender during the early years of ownership, when the value is relatively low, the company will likely charge surrender fees, reducing your cash value.
• Income tax: When you surrender your policy for cash, the gain on the policy is subject to income tax.
• Alternative options: Consider other options before using your life insurance policy for cash, such as borrowing against your 401(k) plan or taking out a home equity loan.

Life insurance living benefits

Policy Riders

Policy riders are add-ons to your policy that provide additional protection. Some policy riders allow you to receive part of the policy's death benefit under certain circumstances, such as if you're diagnosed with a serious illness or need long-term care. Common types of living benefit riders include:

• Accelerated death benefit rider: Pays out some or all of the death benefit if you're diagnosed with a serious illness.
• Critical illness rider: Provides funds to help pay medical expenses for certain qualifying illnesses with high costs and a shortened life expectancy, such as a stroke, heart attack or kidney failure.
• Chronic illness rider: Similar to the critical illness rider, but applies if you're diagnosed with a chronic illness that prevents you from performing at least two out of six "activities of daily living" (ADLs), such as eating, bathing or using the bathroom.
• Return-of-premium rider: Refunds some or all of your term life insurance premium payments if you outlive your policy term.
• Waiver of premium rider: Allows you to suspend premium payments while keeping the policy in force if you become disabled and can no longer work.

Cash Value Life Insurance

Permanent life insurance policies have a built-in savings component called cash value that grows over time. You can usually take out a loan or make withdrawals from the policy's cash value. Some people use this cash value to supplement their retirement income.

With cash value life insurance, insurers deposit a portion of your premium payments into an interest-bearing account. Once it reaches a certain balance, you can use the cash value to pay your premiums.

Things to Consider

Living benefits in life insurance can provide an extra layer of financial security if you become ill or need an extra source of income. However, living benefits often reduce the policy's death benefit for your survivors.

Adding living benefits to life insurance usually increases the cost of coverage. Permanent life insurance policies that build cash value are substantially more expensive than term life policies with a similar death benefit.

Frequently asked questions