What benefit does taking a partial surrender on a universal life policy provide?

Taking a partial surrender on a universal life policy allows the policyholder to withdraw a portion of the cash value without incurring taxes on the interest earned, as long as certain conditions are met. This is beneficial because it provides liquidity to the policyholder while preserving the tax-deferred status of the remaining cash value. In essence, the amount withdrawn is considered a return of premium, or the amount the policyholder has paid into the policy, rather than taxable income.

This feature is particularly appealing for individuals needing funds for emergencies or large expenses since they can access their accumulated value without immediate tax implications, provided that the withdrawal does not exceed their total premiums paid into the policy. By allowing this type of access, universal life policies offer flexibility in managing one's financial needs while still maintaining a life insurance component.