Accessing policy cash value can be a double-edged sword:<\/p>\n
Loans are typically easier than bank credit checks and can carry reasonable interest rates. They also don\u2019t immediately trigger taxes. Yet, the accumulation of loan interest and the reduction in death benefit pose risks if not managed. If the policy eventually lapses, a large unpaid loan can transform into taxable income exceeding your cost basis.<\/p>\n
Withdrawals up to basis are generally tax-free. Strategically, policyholders might first withdraw basis (the sum of paid premiums) before tapping gains. Exceeding basis can trigger taxation. Moreover, each withdrawal often reduces the death benefit.<\/p>\n
If subaccount performance plummets or COI charges skyrocket and you\u2019ve taken substantial loans, you can face a scenario where the policy\u2019s net value goes negative, causing a lapse. In that moment, the outstanding loan above your basis may be treated as income, generating an unwelcome tax burden.<\/p>\n","protected":false},"excerpt":{"rendered":"
Accessing policy cash value can be a double-edged sword: Loans: Pros and Cons Loans are typically easier than bank credit checks and can carry reasonable interest rates. They also don\u2019t immediately trigger taxes. Yet, the accumulation of loan interest and the reduction in death benefit pose risks if not managed. If the policy eventually lapses, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"slim_seo":{"title":"Navigating Policy Loans, Withdrawals, and Tax Traps - VUL Insurance Canada | Smart Variable Universal Insurance Options with Investment Growth","description":"Accessing policy cash value can be a double-edged sword: Loans: Pros and Cons Loans are typically easier than bank credit checks and can carry reasonable intere"},"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[],"tags":[],"class_list":["post-110444","post","type-post","status-publish","format-standard","hentry"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pgBVM2-sJm","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/posts\/110444","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/comments?post=110444"}],"version-history":[{"count":0,"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/posts\/110444\/revisions"}],"wp:attachment":[{"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/media?parent=110444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/categories?post=110444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vulinsurance.com\/variableuniversal\/wp-json\/wp\/v2\/tags?post=110444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}