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Life Insurance Policy... continue or cash out?

5,920 1,968 November 26, 2017 at 06:07 PM
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Death Benefit: $265k
Cash value: $45k

Annual dividends: $869
Annual premium: $1,590
= $721 out of pocket to renew yearly.

What say you SD? I'm 40 in good health. We do not need the money either way. Roth and 401k maxed. This was a 'gift' from my grand mother back when I was like 13 or so. (Gee, thanks grandma? I WANT GI JOES!!!!). IIRC the benefit way back in the day was $10k or the initial buy in was $10k, I forget.

I'm torn. Part of me just says let it rot until I kick the bucket and let the wife/kids have a lil bump. Another part of me says cash it out and fund something for the near term / or college education(s) (2).

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#2
Request an in force illustration from the company

Very lousy return to date which is typical for WL

Calculate the return going forward since past is irrelevant both guaranteed and illustrated from in force illustration.
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#3
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#4
I'm not a Dave Ramsey acolyte but he hates whole life..... probably because the cost/benefit is really poor. I haven't personally run the numbers but basically you're paying for life insurance + annuity, but if you priced them separately, you'd get better coverage, better returns, all for lower "premiums"; FWIW.
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#5
That's a big premium considering the coverage. You can do much better at 40 in good health.

Do you have another life insurance policy, preferably term? If you do, and it's enough, I'd just cash this one out. It's a waste of money.

If you don't have other life insurance but need it, I would get that set up first and then cash this one out.

My wife still has one of these policies from when she was a little kid. For her, though, the premiums are taken out of the dividends so it's totally hands-off. It earns about 3% per year after all expenses. If yours made money, I'd hold onto it, but since it costs money, I'd say dump it.

Edit: Keep in mind you'll be taxed on the gains in the account if you cash it out.
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Last edited by TrentSteel December 2, 2017 at 10:14 PM.
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#6
I would cash it out. You can get much better rate of return elsewhere and a better deal on term insurance if necessary!
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#7
Life insurance is not an investment vehicle. It is there to cover your family's bills should you pass.

20 year term. It sounds like you are financially responsible and most likely will not have any debt by your 60s. Wife should hopefully be able to live off the investments your making now.
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#8
If you are smart you will listen to every word dhodson says.
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#9
My question is similar.

I bought a policy when I was 21. The premium is $240 a year. The death benefit is $50,000.

I'll be 50 this month and the premium has never gone up. I have only borrowed against the cash value once and that was $1700, IIRC. The current cash value is about $1500.

I hate to admit it, but I don't even recall why I bought life insurance when I was 21. I vaguely recall someone in my office having a relative that was just starting to sell life insurance or something, so maybe that was it.

Anyhow, this seems pretty cheap and it is the only life insurance I have. It's not much but it would pay for my cremation, with a little left over for the hubby to pick up a hooker and some blow. On the flip side, the interest rate is only 4.7% and I could probably do better elsewhere. It was paying 6.75% back in 1990.

Thoughts?
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#10
You are likely incorrect in your assumptions. You likely have a UL and not whole life. You have been paying 240 dollars a year for about 29 years. If the policy had zero gain then you would have about 7k (premiums paid to date) in cash value (assuming u paid back the loan and weren't silly enough to allow loan interest to continue to eat into it). With ULs the insurance cost is going up and I bet yours is as well. They just have been subtracting it from the cash value every year which is very likely why your policy has so little cash value even after 3 decades. These things are horrible but not only no gain but a loss compared to premiums paid after 3 decades would be even worse than typical. Request an in force illustration. Likely you are going to find out that the policy is going to lapse in the next few years even with 240 dollars per year.
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#11
Quote from dhodson
:
You are likely incorrect in your assumptions. You likely have a UL and not whole life. You have been paying 240 dollars a year for about 29 years. If the policy had zero gain then you would have about 7k (premiums paid to date) in cash value (assuming u paid back the loan and weren't silly enough to allow loan interest to continue to eat into it). With ULs the insurance cost is going up and I bet yours is as well. They just have been subtracting it from the cash value every year which is very likely why your policy has so little cash value even after 3 decades. These things are horrible but not only no gain but a loss compared to premiums paid after 3 decades would be even worse than typical. Request an in force illustration. Likely you are going to find out that the policy is going to lapse in the next few years even with 240 dollars per year.
Should I cash out/cancel it?
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#12
You should request an in force illustration

It will show you how the policy is currently performing and give you an idea on where it's going

It's free to do that

Then you can decide
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