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Ask MoneySense
I cashed in my whole life insurance policy last year and received a T5 suggesting I have to pay tax on the full amount of my cash value. Is this correct? The cash surrender value was $27,000, I paid $28,000 in premiums, and they told me my pure cost of net insurance was $30,000, whatever that means. It doesn’t make sense to me! When I purchased the policy, I was told I could use this money for my retirement. I don’t remember the insurance agent ever saying anything about tax.
I cashed in my whole life insurance policy last year and received a T5 suggesting I have to pay tax on the full amount of my cash value. Is this correct? The cash surrender value was $27,000, I paid $28,000 in premiums, and they told me my pure cost of net insurance was $30,000, whatever that means. It doesn’t make sense to me! When I purchased the policy, I was told I could use this money for my retirement. I don’t remember the insurance agent ever saying anything about tax.
—Rasheed
Is cashing out whole life insurance taxable?
Ah, Rasheed, I am sorry to tell you the insurance company is correct. I am glad you asked this question because it serves as a warning to anyone who owns a whole life insurance policy. Before cancelling a whole life insurance policy, contact the insurance company or your agent, and ask what the taxable amount will be. You are also wondering how much is taxable.
How not to calculate the taxable amount on insurance
Many people assume the insurance cash value is just like any other investment—50% of a capital gain is taxable according to your income tax bracket…
Cancelling a Personal Health Insurance Plan
– life-insurance-quotes.ca
Can I Cancel My Personal Health Insurance Plan?
Yes, absolutely. You can cancel your plan at anytime. Generally, 30 days notice is required but depending on the insurance carrier your coverage is with and the date your next premium is due it could be shorter than this.
Are There Any Penalties If I Cancel My Plan?
When you provide the notice required, there are no financial penalties, however; some insurance carriers will not let you apply for another health and dental plan with them for at least 2 years (24 months).
Pro Tip!
It is highly recommended to give the insurance company the reason you are cancelling so that they can keep it on file. If you are cancelling because your situation has changed, and you are now covered under an employee sponsored group benefits plan it is VERY important to indicate this. In this situation you can apply for another plan anytime without being restricted to a 2 year wait period.
How Do I Cancel?
If you want to cancel your health and dental benefits plan you should reach out to your Advisor for help…
