Cashing In a Life Insurance policy?

Question

Hi, I have a life insurance policy that has a cash value of $783. I want to cash it in, but the only form I got sent to fill out was a W-9 form, which I did fill out (cuz my address changed), and I faxed it back to them. Is that the only thing I need to fill out in order to get the check from them? Or do I have to wait for them to contact me and then actually go to their offices or fill out more papers? It was taken out for me by my father back in 1986. Also, will I have to pay any taxes on this? Help!!! No one else I asked knows the answer! :(

Answer 1

OK, only the policy owner can cash the policy in.  If your father never transferred ownership to you, that's him.

You need them to send you the paperwork, that the policy owner needs to sign, to cash it in.

You only pay taxes on the net gain - likely, he paid a lot more than that in premiums, so what you actually have is a loss.  You don't pay taxes on that.

Answer 2

Call the insurance company and ask them.  It's odd that they'd only send you a W-9 form unless you've already signed a cancellation form...or if they don't need a form.  They'll also be able to tell you who owns it and how much was paid into it.  You'd think after 22 years there's a gain.  AND, you'd also think there's a gain if they're making you fill out a form that's needed to send you a 1099.

Jeff

Answer 3

You would only have to pay taxes on $783 less the premiums he paid in.  On a whole life policy like this he has probably paid $783 many times over in premiums.  Besides, even if there were a couple of hundred bucks in gains on this thing, who gives a flip about income taxes on a couple of hundred bucks.  

Also, you won't be able to cancel it unless he transfered ownership of the policy over to you.  You should be able to call up their customer service department with the policy number and ask them what you need to do.  

My dad transferred a similar policy over to me when I turned 25.  I called them up the next day and said to cancel the policy and they walked me through the process.  

Good luck.