Cashing Out On Thrivent Life Insurance: A Step-By-Step Guide

Thrivent Life Insurance offers a range of financial services to its clients, including whole life insurance. Whole life insurance is a form of permanent life insurance that is guaranteed to last the policyholder's entire lifetime. It allows the cash value of the policy to grow at a guaranteed interest rate, ensuring the build-up of wealth over time. The cash value of a whole life insurance policy can be withdrawn, taken as a loan, or used to pay premiums. However, accessing the cash value will reduce the death benefit, and there may be fees and tax implications associated with the withdrawal. It is important to carefully review the contract and consult a financial advisor before making any decisions regarding Thrivent Life Insurance.

Withdrawals

You can withdraw or take out a loan on the cash value of your whole life insurance policy to pay for major expenses, like college, a down payment on a house, an emergency fund, or retirement income. If you have accumulated a significant cash value and no longer need the full death benefit, you can opt to receive regular payments from the policy's cash value. This income may be tax-free, since there is no tax liability on partial surrenders of non-modified endowment contracts until you have received all your premiums back.

Taking out a loan against a portion of or all of the contract's cash value is also an option. The cash value is used as collateral. You can pay the loan back at your own pace or not at all, though this comes with potential drawbacks. For example, not paying back the loan may cause your contract to lapse if you don't maintain a sufficient cash value. You will also have to pay interest to your insurer and your death benefit will be reduced, so your heirs won't receive the full face value.

Before withdrawing or taking out a loan on your whole life insurance policy, it's important to consult a financial advisor to understand the full implications of your decision.

Loans

Thrivent Life Insurance offers permanent life insurance coverage that includes a death benefit and builds cash value that you can access during your lifetime. This cash value can be used to fund financial goals like retirement, college expenses, or buying a home.

Taking out a loan against your life insurance policy means borrowing from its cash value. This can be done with whole life, universal life, and variable universal life insurance policies, which are types of permanent coverage that usually have a cash value component. The cash value acts as collateral for the loan, and you can typically borrow up to 90% of it. It's important to note that taking out a loan will reduce the death benefit that your beneficiaries will receive.

The loan process for a life insurance policy is generally faster than that of a traditional loan, as the money is already in your contract. You can often access the funds within days, without the need for lender underwriting or credit checks. Additionally, you have flexible repayment options and competitive interest rates.

However, there are some drawbacks to consider. If you don't maintain a sufficient cash value, your contract could lapse, resulting in a loss of coverage and potential tax penalties. Interest charges will also accrue on the loan balance, and if left unpaid, could eventually deplete the cash value. Therefore, it is essential to weigh the pros and cons before deciding to borrow against your life insurance policy.

Surrendering your policy

Before making the decision to surrender your policy, carefully read through your contract to understand the potential consequences. It is also important to consider the impact on your death benefit. Any cash you take from your life insurance, including any loan amounts you do not repay, can reduce your death benefit, resulting in a smaller payout for your loved ones when you pass away.

If you surrender your policy, you will typically receive the accumulated cash value, minus any fees and outstanding loan balances. However, surrendering your policy may create a taxable event, depending on the amount of earnings in the contract at the time of surrender. Therefore, it is important to consult with a tax advisor to understand the tax implications before making any decisions.

It is crucial to weigh the benefits of surrendering your policy against the potential consequences. While you may receive a lump sum of cash, you will lose the financial protection that your life insurance policy provides for your loved ones.

Paying premiums

There are three ways to pay premiums for whole life insurance:

• Ongoing premium payments: This is the most common method, where you submit premiums monthly, quarterly, twice a year, or annually. This allows you to spread the cost of insurance over a lifetime. However, missing a payment may cause your coverage to lapse. The incremental payments also mean your cash value may have less growth potential.
• Limited pay whole life insurance: With limited payment life insurance, your premiums are completely paid up after a certain period or when you reach a certain age. Once you hit that milestone, your coverage remains active for life without further payments. This option enables your cash value to grow at a faster rate than with standard whole life insurance, but the premiums are higher since you're not paying into the contract for as long.
• Single premium whole life insurance: This option lets you pay for your life insurance contract in full and upfront, giving you immediate full coverage. It's not affordable for everyone, but it maximizes the growth potential of your cash value since you're funding it all at once. However, all single-premium life insurance policies are automatically classified as modified endowment contracts (MECs), which changes the taxability of loans and withdrawals from your cash value.

You can pay your premiums online, by phone, by check, or from another Thrivent product. Thrivent also allows you to set up automatic, recurring monthly payments from a checking or savings account.

Dividends

Firstly, you can credit your dividend toward your premium to reduce out-of-pocket payments. You can also pay yourself the dividend amount directly in cash. You can also credit the dividend to your life insurance contract to earn interest, or use it to pay back any loans you've taken out against your contract.

Another way to use your dividends is to purchase paid-up additional insurance (PUA). Each PUA has its own death benefit and cash value and earns dividends, so you can think of it like a mini life insurance policy that you can obtain without medical underwriting or increasing your premium payment. You can access the PUA cash value in the same way you would the cash value of your main policy: by taking out a loan against the PUA or surrendering it.

Thrivent paid out an all-time high of $542 million in dividends and policy enhancements to eligible clients in 2024.

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