Life Insurance offered through Allstate Life Insurance Company, Northbrook, IL; Allstate Assurance Company, Northbrook, IL; and American Heritage Life Insurance Company, Jacksonville, FL. In New York, life insurance offered through Allstate Life Insurance Company of New York, Hauppauge, NY.
1Loans, if not repaid, and withdrawals reduce the contract’s death benefit and cash value. 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. However, when cash values are used to repay a loan, the transaction is treated like a withdrawal and taxed accordingly. If a policy is a modified endowment contract, loans are treated as a taxable distribution to the extent of policy gain. Loans, withdrawals and surrenders are treated first as distributions of the policy gain subject to ordinary income taxation, and may be subject to an additional 10% federal tax penalty if made prior to age 59½.
2Increases to the death benefit require underwriter approval, which means the insured may need a new medical exam. Changes to the death benefit can also have income tax consequences. Consult a tax advisor for additional information.