Dear Animom,
Congratulations on your fully paid-up life insurance. Wow, you don't have to pay anymore premium!
This question is actually better answered by your insurance company because you have not provided enough information about the type of life insurance policy and your basis in the policy.
If its a life insurance policy with cash value, you can take out an amount equal to your total premium payments without owing taxes. If your withdrawals exceed your basis in the policy, you will owe taxes on the withdrawal.
Also earnings in the policy have been growing tax-deferred, therefore you will pay tax on the earnings at your ordinary income tax rate.
I hope this gives you a fair idea of the ax implications of the withdrawal.
Sincerely
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