The inside build-up of cash value in a life insurance policy is not considered to be taxable unless or until the policy is __________. This is true even if the cash value is taken out as a loan.

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The inside build-up of cash value in a life insurance policy is not taxable, even if it is taken out as a loan, unless or until the policy has been cancelled, surrendered, or lapsed. In this case, the amount that is above the policy holder's basis will be taxable as income. The remainder of the cash is considered to be the policy holder's basis.

The Inside Build-Up of Cash Value in a Life Insurance