I JUST LEARNED THAT EVEN THOUGH
MY WHOLE LIFE INSURANCE POLICY IS
ACCUMULATING CASH VALUE AND I
HAVE NEVER BORROWED AGAINST
THE POLICY, MY BENEFICIARY WILL
ONLY GET THE FACE AMOUNT OF THE
POLICY AND WILL NOT RECEIVE THE
CASH VALUE THAT THE POLICY
ACCUMULATED. IS THAT TRUE?
WHO CAN TAKE OUT A POLICY ON
MY LIFE?
800-492-6116 Toll-free
insurance.maryland.gov
INSURANCE FAQs
LIFE INSURANCE
An insurable interest is required to obtain a life
insurance policy on another. You, individuals
closely related by blood or law to you, such as a
spouse or children, have an insurable interest on
your life. In some circumstances, a person with a
substantial economic interest, such as certain
employers or a business partner, may have an
insurable interest.
WE’RE NO LONGER MARRIED SO
MY EX-SPOUSE NO LONGER HAS
AN INSURABLE INTEREST. HOW
DO I GET MY LIFE INSURANCE
POLICY BACK?
No. If you buy a policy on your own life, you
become the owner of the policy. As the owner, you
can name anyone as beneficiary, including your
estate, a charity, friend or a stranger.
MUST MY BENEFICIARY HAVE AN
INSURABLE INTEREST?
A beneficiary will receive the death benefit in the
policy. However, some whole life policies may pay
both the policy amount and the cash value. You
should inquire about this provision with your
insurance professional before purchasing a whole
life insurance policy.
Insurable interest is determined at the time
of policy inception. If your spouse legally
took out the policy while you were married,
and your spouse is the owner when you
divorce, your ex-spouse remains the owner.
Your ex-spouse can transfer ownership to
you or another person with insurable
interest.
IF I TAKE A LOAN OUT AGAINST
MY LIFE INSURANCE POLICY, WILL
I HAVE TO PAY TAXES ON THIS
LOAN?
In general, taking out a loan against your life
insurance policy does not count as taxable
income. There may be tax consequences if
the policy lapses. You should consult your
insurance professional and tax adviser.
Contact the Maryland Insurance Administration at:
200 St. Paul Place, Suite 2700
Baltimore, Maryland 21202
410-468-2000 | 800-492-6116 | 800-735-2258 TTY
https://insurance.maryland.gov/Consumer/Pages/FileAComplaint.aspx
ABOUT THE MARYLAND INSURANCE ADMINISTRATION
The Maryland Insurance Administration (MIA) is the state agency that regulates the business of
insurance in Maryland. If you feel that your insurer or insurance producer acted improperly, you
have the right to file a complaint. The MIA can investigate complaints that an insurer or insurance
producer has:
Denied or delayed payment of all portions of a claim
Improperly terminated your insurance policy
Raised your insurance premiums without proper notice or in
excess of what the law allows
Made false statements to you in connection with the sale of
insurance or the processing of insurance claims
Overcharged you for services, including premium finance charges
This consumer guide should be used for educational purposes only. It is not intended to provide legal advice or opinions regarding coverage under a specific
insurance policy or contract; nor should it be construed as an endorsement of any product, service, person, or organization mentioned in this guide. Please
note that policy terms vary based on the particular insurer and you should contact your insurer or insurance producer (agent or broker) for more information.
This publication has been produced by the Maryland Insurance Administration (MIA) to provide consumers with general information about insurance-related
issues and/or state programs and services. This publication may contain copyrighted material which was used with permission of the copyright owner.
Publication herein does not authorize any use or appropriation of such copyrighted material without consent of the owner. All publications issued by the MIA
are available free of charge on the MIA's website or by request. The publication may be reproduced in its entirety without further permission of the MIA
provided the text and format are not altered or amended in any way, and no fee is assessed for the publication or duplication thereof. The MIA's name and
contact information must remain clearly visible, and no other name, including that of the insurer or insurance producer reproducing the publication, may
appear anywhere in the reproduction. Partial reproductions are not permitted without the prior written consent of the MIA. Persons with disabilities may
request this document in an alternative format. Requests should be submitted in writing to the Director of Communications at the address listed above.
MY GRANDMOTHER RECENTLY
PASSED AWAY AND I WAS A
BENEFICIARY TO HER LIFE
INSURANCE POLICY. WILL I HAVE TO
PAY TAXES ON THE MONEY THAT I
RECEIVED FROM THE POLICY?
Generally, life insurance proceeds you receive as
a beneficiary are not included in gross income.
However, there are situations where interest
earned under a policy may be taxable. Consult
your tax professional for information specific to
your situation.
MY MOTHER HAS PAID MORE INTO
HER LIFE INSURANCE POLICY THAN
THE DEATH BENEFIT THAT WILL BE
PAID OUT. IS THIS LEGAL?
Life insurance premiums are based on the
likelihood that someone will die before reaching
a predicted age. The insurer may refund excess
premium or the policy may provide an increase
in cash value. Check with your tax advisor to
learn if there are tax consequences from
payment of excess premium.
I TOOK OUT A LIFE INSURANCE
POLICY ON MY CHILD WHO IS NOW
GROWN AND THE INSURANCE
COMPANY IS SAYING I CANNOT
CHANGE THE BENEFICIARY. CAN
THEY DO THAT?
A typical child policy is a term life policy or
rider that covers a child to a certain age.
These policies terminate automatically at a
certain age, often 25, and may be converted
to a whole life insurance policy. If your adult
child converts the policy to a permanent life
insurance product, your adult child will be
the owner and will pay the premiums. Your
ability to make changes to the named
beneficiary is governed by the terms of the
policy.
