Partial withdrawals and surrenders from life policies are generally taxed as ordinary income to the extent the withdrawal exceeds your investment in the contract, which is also called the "basis." In some situations, partial withdrawals during the first 15 policy years may result in taxable income prior to recovery of the investment in the contract. Loans are generally not taxable if taken from a life insurance policy that is not a modified endowment contract (MEC). However, when cash values are used to repay a loan, the transaction is treated like a withdrawal and taxed accordingly. Unpaid interest on loans is added to the loan principal, thereby increasing the total debt on the policy. The combination of an increasing loan balance and deductions for contract charges and fees may cause the policy to lapse, triggering ordinary income tax on the outstanding loan balance to the extent it exceeds the cost basis in the policy. Loans, if not repaid, and withdrawals reduce the policy's death benefit and cash surrender value.
The death benefit of life insurance policies that were transferred for value may be subject to ordinary income taxes. Estate taxes may apply. Consult your tax advisor for additional information.
Important information about Variable Universal Life Insurance
Since cash value depends on the performance of the subaccounts you choose, there is the potential for losing cash value, which could cause your policy to lapse.
Variable universal life insurance policies carry annual insurance company mortality and expense risk charges, withdrawal charges in the early years, and administrative fees. Individual features may be offered at an additional cost. The value of a variable universal life insurance policy will fluctuate with the investment performance of the underlying subaccounts and may be worth more or less than the original investment.
Management fees and/or other expenses also apply on an ongoing basis for each subaccount investment portfolio available under the policy. Please see the prospectus for more details concerning any applicable fees and each subaccount investment portfolio's expense.
Variable universal life products are long-term investments designed to provide life insurance protection and flexibility in connection with premium payments and death benefits. You should carefully consider the investment objectives, risks, charges, and expenses of the investment alternatives before purchasing a policy. These policies have limitations and are sold by prospectus only. The prospectus contains details on the investment alternatives, policy features, the underlying portfolios, fees, charges, expenses, and other pertinent information. To obtain a prospectus or a copy of the underlying portfolio prospectuses, please contact Lincoln Benefit Life Company or go to accessallstate.com. Please read the prospectuses carefully before purchasing a contract.
Neither Allstate, Lincoln Benefit Life nor its agents and representatives can give legal or tax advice.
All guarantees are based on the claims-paying ability of the issuing insurance company.
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