What is a partial withdrawal from a Universal or Variable Universal Life policy typically considered?

In the context of Universal or Variable Universal Life insurance policies, a partial withdrawal refers to the process where the policyholder takes out a portion of the cash value accumulated in their policy, while keeping the policy active. This action is typically deemed a partial surrender because it reduces the death benefit and cash value of the policy. Partial surrenders allow policyholders to access some of the funds for their needs without forfeiting the entire policy, distinguishing it from a full surrender, where the policy is completely terminated.

Understanding partial withdrawals is crucial because they can impact both the policy's remaining value and the death benefit amount. They may also have tax implications, depending on the specifics of the policy and the amount withdrawn. Thus, identifying a partial withdrawal as a partial surrender accurately reflects this transaction as it captures the essence of accessing funds while still maintaining the insurance coverage.