What happens if cash values are accessed in a universal life insurance policy?

Accessing cash values in a universal life insurance policy typically involves withdrawing funds or taking a loan against the cash surrender value. When this occurs, the cash value in the policy decreases by the amount withdrawn or borrowed. Additionally, the death benefit, which is the amount paid out to beneficiaries upon the policyholder's death, may also be reduced because it is directly linked to the cash value of the policy. Therefore, if cash values are accessed, there will be a corresponding effect on both the policy's cash value and death benefit, reflecting a decrease.

The understanding of how accessing cash values affects both the cash value and death benefit is essential for policyholders, as it impacts future benefits and the overall worth of the policy. It is important to weigh these considerations when deciding to access cash values, as doing so alters the long-term financial strategy that one may have associated with their universal life insurance policy.