What can be a consequence of withdrawing from a whole life insurance policy?

Withdrawing from a whole life insurance policy can lead to consequences such as incurring surrender charges and the potential for taxable income. When a policyholder decides to withdraw funds, they may face surrender charges, especially if the withdrawal occurs within a certain period after purchasing the policy. These charges can reduce the amount of cash value available to the policyholder.

Additionally, if the amount withdrawn exceeds the premiums paid into the policy, the excess amount can be considered taxable income. This means that policyholders must be aware of the tax implications associated with their withdrawals, as they could unexpectedly find themselves facing a tax liability.

The other choices do not accurately reflect the consequences of withdrawing from a whole life policy. Retaining full cash value is not guaranteed upon withdrawal, and increasing policy dividends is not a direct result of such withdrawals. Likewise, while some withdrawals may impact the death benefit, they do not inherently help maintain a higher one. Understanding these aspects is crucial for anyone considering a withdrawal from their whole life insurance policy.