Can you cash in on term life insurance?

You can’t cash in on traditional term life insurance, but return of premium term insurance refunds your premiums when your coverage ends.

Headshot of Policygenius editor Nupur GambhirAmanda Shih author photo

By

Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

&Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Updated|2 min read

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Like other types of insurance, people buy life insurance and make premium payments hoping that they’ll never need to make a claim. Unlike permanent life insurance, which earns interest and can be canceled for a payout or used for a life insurance loan, traditional term life insurance doesn’t come with an option to cash in on your policy. 

But, cashing in on a term policy shouldn’t be your first priority. Term insurance is the simplest and most affordable way to secure the most important part of life insurance: protection for your family. The best choice for most people is to buy a term life insurance policy and invest the savings, even if they outlive their coverage.

Key takeaways

  • You can’t cancel term life insurance and get cash like you can with permanent life insurance

  • You can sell your policy to a life settlement broker, but it’s not recommended

  • You can add riders that let you withdraw from the death benefit for critical medical care 

  • Return of premium term life insurance refunds premiums you’ve paid when your policy expires, but is costly

How to get money back on your term life insurance

There are a few ways you can get money out of your term life insurance policy, but most aren’t the best choice. Common options include:

  • Living benefits riders: Some policy add-ons allow you to pull from the death benefit to pay for medical expenses if you have a critical or terminal illness. The option can support end-of-life care, but decreases the payout your beneficiaries get from your policy.

  • Return of premium life insurance: This added feature ensures any premiums you pay into your policy are refunded when your coverage expires. But, a return of premium policy is 30% more expensive than traditional term life insurance. 

  • Selling your life insurance policy: While it’s legal to sell your policy to a third party, profits are minimal after taxes and any broker’s fees. 

If being able to tap your life insurance policy for cash is important to your financial plans, then whole life insurance may be a better fit.

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Do you get money back if you cancel a traditional term life policy?

The only way to get money back from traditional term life insurance is to cancel during your policy’s free look period, which is usually 10 to 30 days from when your coverage began. Your policy will state the exact length of your free look period.

There’s no penalty if you cancel after the free look period ends, but the most you’ll get is a partial refund if you’ve already paid for future weeks or months of your policy.

You don’t get any money back if you outlive your policy’s term. If you decide later that you want a return of premium insurance, you’ll need to buy a new policy.

→ Read more about how to cancel life insurance

There aren’t many cost-effective ways to cash in on a term life insurance policy. Instead, consider using term life insurance for what it is — a financial safety net for your family — and save the money you would have spent on a return of premium policy or find other ways to make your policy work for your needs. 

→ Learn more about how life insurance works

Frequently asked questions

What happens if you outlive your term life insurance?

If you outlive your term policy, your beneficiaries don’t get a payout and you aren’t refunded any of the premiums you paid. You can convert to whole life if you still need coverage.

Do you get your money back at the end of term life insurance?

You do not get money back when your term life insurance policy expires unless you purchased a return of premium life insurance policy.

Can I sell my term life insurance policy for cash?

You can sell a term life policy to a life settlement broker, but the profits are low. You can’t surrender your policy for a payout from your insurer the way you can with permanent life insurance.