You cannot cash out most term life insurance policies, but you have other options to recover money
Term life insurance is designed to pay a death benefit if you die during the coverage period — usually 10, 20, or 30 years. Unlike permanent life insurance (whole life or universal life), term policies build no cash value while you're alive. When your term ends, the policy simply expires. You cannot withdraw money from it, surrender it for cash, or borrow against it the way you can with permanent policies.
However, if you need money before your term ends, you do have ways to access funds tied to your policy. Some are built into the policy itself. Others involve selling the policy or letting it lapse. Each option has different costs and consequences, and the right choice depends on why you need the money and what your policy actually says.
Key Takeaways
- Term life insurance policies have no cash value and cannot be cashed out, but some policies include a return-of-premium rider that refunds your premiums if you outlive the term.
- A viatical settlement or life settlement allows you to sell your policy to a third party for a lump sum, though you receive less than the death benefit and lose coverage.
- Some term policies include accelerated death benefit riders that let you access part of the death benefit early if you receive a terminal diagnosis.
- Surrendering or canceling your policy stops premium payments but gives you nothing back unless you have a return-of-premium rider.
- Borrowing against a term policy is not possible because term policies have no cash value to borrow against.
Why term policies have no cash value to withdraw
Term life insurance is pure insurance — you pay a premium for the promise that your beneficiaries receive a death benefit if you die during the term. The premium covers the cost of that risk and the insurer's operating costs. There is no investment component, no savings account, and no money accumulating in your name.
Permanent policies like whole life work differently. Part of your premium goes into a cash value account that grows over time. You can borrow against that cash value or surrender the policy and receive the accumulated amount. Term policies do not have this feature, which is why they cost far less per month than permanent coverage.
When your term ends — say, at age 65 if you bought a 30-year term at age 35 — the policy simply stops. You have paid premiums for 30 years and received nothing back except the protection you bought. That is the trade-off of term insurance: lower cost in exchange for no cash value.
Return-of-premium riders: getting your money back if you survive the term
Some term policies include a return-of-premium (ROP) rider. This is an optional add-on that costs more per month but promises to refund all your premiums if you outlive the term. If you buy a 20-year term with an ROP rider and you are still alive at year 20, the insurer sends you a check for every premium you paid.
ROP riders are not common on all policies or with all insurers, and they significantly increase your monthly cost — sometimes by 10 to 50 percent depending on your age and health. Before you buy a term policy with an ROP rider, compare the total cost of premiums over the full term against what you might earn by investing that extra money yourself. The math does not always favor the rider.
If you already have a term policy with an ROP rider, check your policy documents to confirm the exact terms. Some riders require you to be alive on the final day of the term. Others have conditions or exclusions. The refund is not automatic — you typically have to request it from your insurer after the term expires.
Selling your policy through a life settlement or viatical settlement
If you need cash before your term ends, you can sell your policy to a third party. This is called a life settlement (if you are in good health) or a viatical settlement (if you have a terminal illness). A company or investor buys your policy, takes over the premium payments, and collects the death benefit when you die.
You receive a lump sum payment, but it is always less than the death benefit. How much less depends on your age, health, life expectancy, and the current interest rate environment. A 50-year-old in good health might receive 10 to 20 percent of the death benefit. Someone with a terminal diagnosis might receive 50 to 80 percent. The buyer is betting on how long you will live and what they can earn on the investment.
Life settlements are not quick or simple. The buyer will require a medical exam, access to your medical records, and proof of insurability. The process typically takes two to three months. You also lose the death benefit protection — your beneficiaries receive nothing when you die. This option makes sense only if you need the money urgently and have no other source, or if you no longer want or need the life insurance.
Accelerated death benefit riders for terminal illness
Some term policies include an accelerated death benefit (ADB) rider. This allows you to access part of the death benefit while you are alive if you receive a diagnosis of terminal illness, typically defined as a life expectancy of 12 months or less. You do not sell the policy — you receive an advance on the benefit you would leave behind.
The amount you can access varies by policy, but it is often 25 to 100 percent of the death benefit. The remaining balance still goes to your beneficiaries after you die. Unlike a life settlement, you keep the policy in force and your beneficiaries are still protected.
ADB riders are sometimes included free with term policies, but not always. If your policy has one, the terms are spelled out in your policy documents. You will need to provide medical documentation of your diagnosis to the insurer before they release the funds. The process usually takes a few weeks.
Canceling your policy: what happens to your money
If you simply stop paying premiums or formally cancel your policy, the coverage ends. You receive nothing back — no refund, no cash value, no payout. The money you paid is gone. This is the default outcome for any term policy without a return-of-premium rider.
Canceling makes sense if you no longer need the coverage and cannot afford the premiums. But before you cancel, consider whether you might need life insurance again later. Buying a new policy when you are older or in worse health will cost significantly more. If you think you might want coverage again, it is sometimes cheaper to keep paying the current premiums than to let the policy lapse and buy new coverage later.
If you are canceling because money is tight, contact your insurer first. Some offer premium reduction options, extended term coverage (where your current death benefit stays in force for a longer period with no premiums), or paid-up insurance (where your death benefit is reduced but the policy stays active with no more payments). These options vary by insurer and policy type.
Borrowing against a term policy is not an option
You cannot borrow money against a term life insurance policy because there is no cash value to borrow against. This is a hard limit, not a policy-by-policy variation. If you need a loan and own a permanent policy (whole life, universal life, or variable universal life), you can borrow against the cash value. With term, this option does not exist.
If you need a short-term loan, explore other sources: a personal loan from a bank or credit union, a home equity line of credit if you own a home, or a 401(k) loan if your employer plan allows it. These typically have faster approval than a life settlement and do not require you to give up your insurance coverage.
Comparing your options side by side
| Option | How it works | What you get | Timeline | Impact on coverage |
|---|---|---|---|---|
| Return-of-premium rider | Refund all premiums if you outlive the term | Full amount of premiums paid | After term ends | Coverage ends; no death benefit |
| Life settlement | Sell policy to a third party | 10–80% of death benefit (varies by health) | 2–3 months | Coverage ends; no death benefit |
| Accelerated death benefit rider | Access part of death benefit if terminally ill | 25–100% of death benefit (policy-dependent) | A few weeks | Remaining benefit still paid to beneficiaries |
| Cancel the policy | Stop paying premiums | Nothing | Immediate | Coverage ends; no death benefit |
Frequently Asked Questions
Can I get my money back if I cancel my term life insurance?
No, unless your policy includes a return-of-premium rider. With a standard term policy, you receive nothing when you cancel. The premiums you paid are the cost of the coverage you had. If you have an ROP rider, you will receive a refund of all premiums paid, but only if you outlive the full term.
What is the difference between a life settlement and a viatical settlement?
Both involve selling your policy to a third party, but a viatical settlement is specifically for people with a terminal illness or life expectancy under two years. A life settlement is for anyone in any health condition. Viatical settlements typically pay more because the buyer expects a shorter wait to collect the death benefit.
Do all term policies have accelerated death benefit riders?
No. Some insurers include ADB riders automatically; others offer them as an optional add-on for an extra cost. Check your policy documents or contact your insurer to see if you have one. If you do not have an ADB rider and want one, you cannot add it to an existing policy — you would need to buy a new policy.
What happens to my term life insurance if I stop paying premiums?
Your coverage ends, usually within 30 days of a missed payment. You receive no refund or payout. Some policies include a grace period (typically 30 days) during which you can pay the overdue premium and keep coverage active. After that, the policy lapses and cannot be reinstated.
Is it ever worth buying a term policy with a return-of-premium rider?
It depends on your situation and the cost difference. An ROP rider can cost 10 to 50 percent more per month. Over a 20 or 30-year term, that adds up significantly. If you are disciplined about investing the difference in premiums, you may come out ahead by buying standard term and investing on your own. If you want the may provide of getting your money back without having to manage investments, an ROP rider may be worth the cost.