What if you want to surrender your life insurance policy?

Submitted by NonsmokinJoe on Fri, 07/11/2008 - 21:13
You may have your own reasons for surrendering your life insurance policy. The reasons must be significant enough, since surrendering a policy would mean that you lose all the benefits that had prompted you to go for it in the first place.

How much will you get back if you surrender the policy?

You'd receive the accumulated cash value if you surrender your policy before the maturity date. The cash value is the total sum of money that you have paid as premiums for the policy along with the interests earned on them.

What happens after you surrender your policy?

You'll be entitled to receive the accumulated cash value after you surrender your life insurance policy. However, surrendering the policy before the maturity date will impact the way you'll receive it. The consequences of your life insurance policy surrender are enumerated below:
  1. You'll have to pay surrender fees - You'll be charged a fee for surrendering your life insurance policy before the date of maturity. The earlier you surrender the policy, the higher will be the surrender charge that you'll have to pay.
  2. Cash value gets reduced if you'd taken out a loan - The cash value will be less if you had taken out a loan against the policy, since the loan amount and the accrued interest will be deducted accordingly.
  3. Taxes will be imposed - Since you're surrendering your policy earlier than the date of maturity, the cash value might be considered as taxable income. If you have any outstanding loan balance on the policy, taxes will be levied on that as well.
  4. You'll have to renounce the death benefits - The cash value you get from the policy, after you surrender it, will include the accumulated dividends and unearned premiums. You give up both the death benefit and life insurance coverage that you had with the existing policy, and won't need to pay premiums on it anymore.
The remaining cash value is directly paid to the policyholder - either in cash, or in check.

What if you want to retain the death benefits?

It is obvious that no one buys life insurance policy, with the intention to surrender it mid-way. Therefore, it will be wise to consider other options rather than going for a life insurance policy surrender. To retain the death benefits, one may:
  1. Opt for a partial surrender - Transform the existing life insurance policy into a reduced paid-up insurance. Surrendering the policy as a whole gets rid of any coverage that you had with it. With a partial surrender, a portion of the life insurance policy is retained. However, the death benefits and cash value gets reduced.
  2. Borrow against the cash value - If you have immediate cash requirements, you can even take out loans against the cash value, without giving up the death benefits. You may repay the loan with time, but don't need to worry even if you're unable to pay it back. The loan amount will simply be deducted when the insurer gives out the death benefits to the beneficiary.
  3. Purchase a new policy - Use the cash, after surrendering his life insurance policy, to purchase a new term life insurance policy for an extended time period.

How to surrender your life insurance policy

If you've made up your mind that you'll surrender the life insurance policy, you can do the following:
  • Call up the insurance company and know how to surrender your policy.
  • Ask for a Service Request Form.
  • Fill in the necessary details about your policy in the form. Tick the option where you want to surrender the policy.
  • Fill in your preference, i.e. the way you want to receive the available cash value from the policy.
Your insurer might ask you to submit a letter for surrender of insurance policy, Check out the sample insurance surrender letter, which you can forward to your insurer for the purpose.

Related Readings

I have an insurance question:

I am married, age 60, with a $75,000 whole life policy on myself. Premium is $115 a month, and Cash Surrender Value is approximately $20,000. I recall the policy projections showed the cash surrender value would start to erode in my 60's, as mortality probability increases. I also just read that this is common, and to consider surrendering the policy, but no time frame was suggested.

We don't need the life insurance coverage for estate taxes, and my wife's income (she's a realtor) has plummeted dramatically. She's tired of that business, so who knows what the future holds regarding future earning potential (she's late 50-something). Health insurance coverage is a big issue ($780/month just for her - I have single coverage from my employer).

Based on the facts presented, should we consider cashing in my whole life policy?

Posted: 13 Jul 2008 03:08 Post Subject: Surrendering Whole Life Policy?

Lots of topics to discuss here... The policy is an assett for you for sure. Ask the company about taking out some of the cash value (loan). you would still be able to keep the policy in force and if something does happen to you, your wife would recieve the benefit minus the loaned amount. Also, at this point, you are actually paying $115.00 per month for a $55,000 policy since you have the cash value built up. Some other things to consider here:
1: Is it the idea of losing a $115.00 bill that is appeealing to you?
2: Have you considered purchasing a single premium whole life policy with a portion of the cash value to cover expenses? ex: take $5,000 out of the policy to purchase a $10,000 policy with no further premiums due.
3: Holy cow, that's a pretty expensive health insurance premium, considered shopping that rate?
e-mail me if you have any questions, trahitt[at]yahoo.com

*email id deactivated for your safety-lakemen

Posted: 13 Jul 2008 09:43 Post Subject: insurance

Please excuse my 'lack of knowledge' here, but......I din't know you can ACTUALLY surrender a Life Insurance policy. I'm just curious..for what reason would you want to do that? To get the money from it? To get a 'better' ( lack of a better word..) policy....one that may better suit your needs NOW?

Posted: 13 Jul 2008 09:51 Post Subject:

Based on the facts presented, should we consider cashing in my whole life policy?

NonsmokinJoe in my *SAFE opinion I would say...

Yes, no, maybe....just to be clear!

Life insurance is about financially protecting mama and the kids
should you suddenly be eaten alive, head first, by a Big Mac Truck;

and/or you simply don't wake up tomorrow morning.

The question to be answered is:
If you don't wake up tomorrow morning will mama and kids,... financially get along just fine,... without your income and the $75,000 from your policy?

If you were my client I'd recommend you apply for 20 year level term insurance. The premium for a male age 60, PREFERRED PLUS NON-TOBACCO, for $150,000 would be $117.73 per month if you qualify.

Once approved...I'd cash out the $20,000 and invest it in whatever is SAFE and sound for the protection of the cash asset or 1035 exchange for a better contract with a No Lapse Guarantee.

Now if you go bye-bye unexpectedly mama and the kids now have a minimum of $170,000 (life ins. + the cash) AND you are paying right at the same amount of money per month so your monthly budget is not affected.

To implement said plan, take a vacation to the Tampa Bay, Florida area and....

Posted: 18 Jul 2008 04:26 Post Subject:

Before you surrender your life insurance policy in order for you to get the cash values, you should try to consider some things. As we all know, life insurance is for financial protection that when something will happen to you, your beneficiaries will still survive by using the money that is from the insurance proceeds. Now the question here is, Is life insurance still a necessity? Do you still need financial protection? If something would happen to you, would your family be financially stable? I think in that age of yours, I assume that your family can now survive with out your financial aid. If you don't see the need for life insurance in that age, you can surrender it and get the cash values. You can use it to additional funds for your retirement. That is one thing that you need to consider. The need for life insurance. We buy it because we know we need it. If the time comes that you don't need it, surrender it and enjoy the benefit that it will give you.

Posted: 30 Apr 2009 01:06 Post Subject: insurance cash out

my dad has a poilcy thats worth 61,000 he pays 90a month he been paying for 25 years what do think the cash value would be and should he cash out because we need the money now

Posted: 30 Apr 2009 08:48 Post Subject:

This is an old thread that got resurrected. What got missed in this thread is that the question is about surrendering a whole life policy, but the question asker has a universal life policy.

thands, you are asking an impossible question without knowing the cash value and other information. If the cash value is $60,000 and he's not about to die, it may make sense to cash it in. If the cash value is $1, it probably doesn't make sense to cash it in.

Posted: 02 May 2009 02:12 Post Subject:

Ask the company about taking out some of the cash value (loan). you would still be able to keep the policy in force and if something does happen to you, your wife would recieve the benefit minus the loaned amount.

"Something does happen to you" = You die.

I wish I had a dime for every case I've worked in which someone was enticed to take a loan out against a policy believing they could just take out a loan and the death benefit would be casually adjusted on the back end.

Let's not forget about the little things like premium payments and loan interest.

Posted: 02 May 2009 05:45 Post Subject:

I'm glad this was resurrected. Important points to consider. Good catch on the UL thing. I didn't catch the rising mortality rates in the OP post. That definitely points to Universal life.

Secondly, Investigator makes a good point. The interest on policy loans usually isn't that bad, it's the "forgetting about it" that's the issue. The interest will compound, and what was a $30k loan ends up being a whole lot more when the insured dies in 25 years. Oftentimes, they'll also take advantage of auto loan provisions to pay for the premium, and that just goes right on top of any existing loans.

If it sounds too good to be true, and you do it anyway, good luck. I will never say that policy loans are always a bad idea, but I will say that you better remember what you did to the death benefit in the end game. And remember (to quote):

"Something does happen to you" = You die.

InsTeacher 8)

Posted: 02 May 2009 03:05 Post Subject:

Let's also keep in mind that there is much more risk with taking a loan from a UL policy than there is with a WL policy. Loans with UL policies greatly increase the risk of policy lapses. I'm not saying that a loan with WL doesn't come with risk, but the magnitude is much smaller.

Posted: 02 May 2009 08:56 Post Subject:

Great follow-ups guys, thanks for the help.

Posted: 30 Jul 2009 03:17 Post Subject: question

Hi and thank you for your time, I have whole life 150,00 policy paying 175.00 monthly i'm 47 years old, cash value 26,000 and thinking of surrending it, taking cash value out, buying level term policy for 150,000 30 years , paying 84.00 monthly would that be smart or what do recomend?
thank you

Posted: 30 Jul 2009 06:01 Post Subject:

Hello Sara, let's take a closer look at your question.
Because there are usually boatloads of "term-ites" watching these posts, I'll try and keep this as simple as possible.

Let's assume you purchased your whole life policy yesterday from a reputable company. You will pay $175 each month for approximately 25 years. Provided you have made these payments in a timely manner and haven't removed any of the equity from your policy, the plan will [probably] become self-sufficient.

This means that at your age 72, you will have spent $52,500 for a $150,000 life insurance policy that will continue to provide coverage until your heart stops beating - whenever that might be.

If you elect to purchase a $150,000 30-year term plan for $84 per month, at the end of the term you will have spent $30,240. A premium difference of $22,260. Sounds kind of simple, doesn't it?

Just remember, in order for this policy to benefit anyone other than the insurance agent and his/her company, you must die before your age 77. Actually, it doesn't get much simpler than that.

Provided you are in good health, the Commissioner's Ordinary Standard Table of Life Expectancies, predicts you will live to be around 87 or 88 years old. The chances of you purchasing another life insurance policy at your age 77 are not very good at all.

In short, if $150,000 is meant to benefit a husband, children, grandchildren or other loved ones, make sure they know (and understand) you need to die before your age 77 so that you can leave them a little something to remember you by.

By the way, if you have been encouraged by Primerica agent to cancel your whole life policy, for one of their term plans, one of the best known life insurance fraud investigators in the United States suggests that you "just say no".

Posted: 30 Jul 2009 06:38 Post Subject:

Hi Sara..

Obviously it's popular since it reduces the premium rate, but there are certain things that you need to consider-

* Many of the riders that you may enjoy with a WL policy may not be there for a term life policy. Also, the riders that you'd have with term life policies may expire with the term of the policy.

* You won't be able to get loans against term life policies
* No cash value would be generated

* If you'd need to renew this policy at the end of the term the premium may not remain the same and might well be beyond your reach.

So, now it's time for you to think! Roddick

Posted: 30 Jul 2009 08:59 Post Subject:

Hello Sara, you have received some great suggestions from the posters above. I'd request you to pay hid to what InsInvestigator has suggested.

The problem with term life policy is it doesn’t accumulate any cash value. Also, no benefits would be paid if the insured doesn’t die within the term period.

Term plan can be your choice if your only concern is to pay-off your debts after your death but whole life plan would help you in accumulating asset to pass on to your loved ones.

~ Jeremy

Posted: 30 Jul 2009 12:06 Post Subject:

Hi and thank you for your time, I have whole life 150,00 policy paying 175.00 monthly i'm 47 years old, cash value 26,000 and thinking of surrending it, taking cash value out, buying level term policy for 150,000 30 years , paying 84.00 monthly would that be smart or what do recomend?

A few things to note:

1. Keep in mind that if you surrender your policy, you may also incur a taxable event if the cash value paid out is greater than your cost basis (i.e. premiums paid into the policy).

2. $84/month seems awfully high for $150k of 30-year term for a 47 year old female. Even at standard rates, I come up with $50/month for a couple of companies. A $150k policy guaranteed forever (no-lapse UL) at standard rates would be approximately $110/month. If you are in good health with normal height/weight profile, normal family medical history, those premiums could drop to ~$90/month guaranteed forever or $29/month for 30-year term.

3. If you did not want to pay any more premiums, you could exchange the cash value for a paid-up policy that is guaranteed to never lapse with a different company. If in perfect health, you could get a $250,000 death benefit with a lump sum transfer of approx. $25.5k. If in standard health, you could get approximately $210k death benefit with a lump sum transfer of $26k.

If you want to explore these options, feel free to send me an e-mail at dgold@goldfinancialgrp.com. I'm an independent agent and would be happy to put you on the right track. Sounds like your current agent is trying to sell you an overpriced policy unless you have some major medical conditions.

Posted: 27 Jun 2010 08:41 Post Subject: mortgage and life insurance

my mortgage and life insurance is with the same company. will they accept my life insurance before i die as a trade to pay off my mortgage and then no life insurance payment is made when i die

Posted: 27 Jun 2010 03:22 Post Subject:

I guess the key phrase here is "before I die."
Allianz used to sell a product called an Equity Index LifeFund III that, in my opinion, was one of the best policies I've ever seen.

Built into the policy was something called a Preferred Settlement Value (which was really nothing more than a type of modified accumulation account) that could be used at retirement - or some point in the future - as a source of income. However, when the PSV was utilized, the policy was terminated.

Now, back to your question; I've never seen a case where a mortgage/insurance company traded the settlement value of a life policy in that way. I'm not saying it absolutely couldn't happen - especially if you were terminally ill and the company could benefit from the transaction (the most important provision). I just seriously doubt they would do it.

Posted: 25 Jan 2012 03:55 Post Subject:

This is not a relationship advice column. Moderators, please delete the spam posts and block the spammers please.

Posted: 21 May 2012 06:39 Post Subject: whole life insurance

a family member is leaving me 4500 dollars in a whole life insurance policy when they die? Can I cash this out now, if they agree and how much would I receive? Money has been sitting there since 1995.

Posted: 22 May 2012 02:57 Post Subject:

Can I cash this out now, if they agree and how much would I receive? Money has been sitting there since 1995

This is an odd request. Why would "they" agree to cash out the policy now and give you the money instead of keeping it for themself?

A $4500 policy "sitting there since 1995" would not be worth $4500.

Posted: 28 May 2012 10:50 Post Subject:

You can't cash it out because it is not your policy.

Posted: 07 Jun 2012 02:08 Post Subject: Cash Value policy

I have 2 cash value policies both worth $25,000. I have other insurance also well over $400,000. I was thinking of cashing these 2 policies in later down the road for the cash value (maybe in 20 yrs; I've had the policy for only 10 yrs now). Is that a good idea? I got this policy when I was single and make very small monthly payments ($100). your thoughts.

Posted: 07 Jun 2012 04:54 Post Subject:

I was thinking of cashing these 2 policies in later down the road for the cash value (maybe in 20 yrs

Have you consulted your Magic 8-Ball on this one yet?

You can't be serious asking a question in 2012 about what you should do or might do in 2032. No one here can give you a better answer than that Magic 8-Ball toy.

Anything could happen in the next 20 years . . . you could die, the Martians could take over the world and having life insurance or its cash value, or stocks, or bonds, or mutual funds, or cash under the mattress all become meaningless, or Jesus could return and some of us would be overjoyed as we walk the streets of gold while others would have considerably different concerns that no amount of life insurance cash value could solve.

Or Obama could be reelected in November and within the next four years AmeriKa the socialist state becomes a reality . . . and your cash value is confiscated and given to those who have no life insurance at all and demand the government give them some -- for free, just like Obamacare.

I can tell you this, in the meantime, don't stop making those monthly payments, or your cash value will surely evaporate, regardless of the outcome of any of my "thoughts" above.

Posted: 23 Jul 2012 04:48 Post Subject: 75,000 life policy too expensive now

I have had my $75,000 whole life policy for many years..I am 77 years old in decent health..the yearly premiums are getting to expensive..could I cash it in and buy a
term policy to protect my wife and reduce my yearly outlay / or what would be a better choice???

Posted: 23 Jul 2012 07:18 Post Subject:

You could "cash it in" but you will almost certainly NOT like the cost of a term policy at your age. A new term policy might have a level premium for 2-5 years, but it would eventually become Annual Renewable Term, meaning your cost of insurance will increase CONSIDERABLY every year thereafter. In the next 20 years or so, you would pay in the neighborhood of $175,000 or more in premiums to keep that $75,000 death benefit to age 95

I assume when you say "the yearly premiums are getting expensive" you mean the same amount you've been paying all these years is now a much larger percentage of your monthly/annual income. If your actual premium is increasing, then you probably do not have a typical Whole Life policy.

One alternative would be to work with a LICENSED Life Settlement Broker who would find someone willing to "buy" your insurance policy from you. Even that's going to be difficult because your insurance amount is relatively small at only $75,000. Your wife would no longer be the beneficiary.

Another alternative would be to make a Section 1035 Exchange of your policy's cost basis and cash value into a new, "guaranteed minimum death benefit" form of Universal Life insurance. This policy would, essentially never acquire additional cash value, and the cash value you brought into the policy would likely soon evaporate (over 5-10 years) or be used to "buy-down" the premium, but as long as you paid the premium, there would be a $75,000 death benefit available. Missing a premium payment in the future could void the guarantee, and you could be forced to pay even higher premiums to keep your policy alive -- the same scenario as buying that very costly term policy.

Similarly, the cash value in your current policy may also be enough to pay the premiums for a number of years into the future, but that, too, will erode the death benefit over time, as the loans to pay premiums accumulate with interest (if you were not paying some or all of those amounts back to the insurance company).

For now, don't give up what you have. It may be the best thing for you. That would be the most dreadful mistake.

As a Licensed Life & Disability Insurance Analyst, I can perform an unbiased policy analysis for you to give you a better idea of what your options are or may be.

Posted: 23 Jul 2012 08:47 Post Subject:

Are California Licensed Life and Disability Insurance Analysts, allowed to solicit business from out of state?

From what you've written about disability coverage in the past, hopefully, you don't have any customers who are paying you for DI advice.

Posted: 24 Jul 2012 12:23 Post Subject:

This is not a question about DI, if you had taken the time to read the post, it's about life insurance.

CIC 32.5. "Life and disability insurance analyst" means a person who, for a fee or compensation of any kind, paid by or derived from any person or source other than an insurer, advises, purports to advise, or offers to advise any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance
contract, in any manner concerning that contract or his or her rights in respect thereto.

This does not mean soliciting insurance. And it does not require compensation.

Posted: 24 Jul 2012 05:41 Post Subject:


I understand that his question was about life insurance. I was just pointing something out about DI.

I thought that the part "for a fee or compensation of any kind..." required compensation. Since that is integral to the definition, if you remove the fee, how are you working as an analyst?

I didn't ask whether you you could solicit insurance out of state. I know that the answer to that is "no".

I asked whether you could solicit "business" from out of state. In case I wasn't clear, I was asking about your ability to solicit analyst work out of state. I asked the question because I don't know the answer.

Is Max Herr, a California licensed "Life and Disability analyst" allowed to solicit business on a public forum to do analyst work?

Posted: 20 Sep 2012 06:32 Post Subject: surrender policy

i have fill out all the necessary form ot surrender .how long will it take to return


Hi Sil,

I would like to surrender my whole life policy due to financial reasons. Please advise whether is it worth a penny. I am 51yrs I have been paying premium of $50.20 since 1986(26yrs),

Posted: 22 Sep 2012 10:34 Post Subject:

You need to address your question directly to the insurance company.

This website is not connected to your insurance company.

Posted: 17 May 2013 08:02 Post Subject: Whole life policy

I wanted to know if I had whole life policy and it lapse do I get the cash value or do I lose it?

Posted: 18 May 2013 09:17 Post Subject:

if I had whole life policy and it lapse do I get the cash value or do I lose it?

It depends on the reason for the lapse, and how long you've had the policy. Why did your policy lapse, and how long have you had it and how much have you paid in premiums?

Generally, whole life policies include an "Automatic Premium Loan" provision that allows the insurance company to invade your cash value and "borrow: from it to pay unpaid premiums at the end of the grace period. The more you've paid in premiums and the longer you've owned the policy, the more cash value you should have.

If your cash value has been exhausted to pay premiums, then there is no cash value remaining, and would explain a lapse. There would be nothing to refund or recover.

If you policy is one of the few without an Automatic Premium Loan provision, and it lapses due to nonpayment of premium, your cash value must be used in one of three main ways -- cash refund, purchase extended term insurance, or purchase reduced paid-up insurance. State "nonforfeiture" laws usually require the insurance company to use the extended term option, but your policy could state otherwise.

Without more information from you, there is no way to properly answer the question.

Posted: 02 Aug 2013 03:01 Post Subject: please help?

My father passed away 6 years ago and I found he had a 5000 dollar face amount. On me since 1984, 30 years. Whole life insurance policy.. how do I get this and how much do u think it has in it?

Posted: 02 Aug 2013 04:44 Post Subject:

If the policy is even in force after all these years, it might have a few hundred dollars of cash value. Contact the insurance company to find out for certain what the condition of the policy is.

Posted: 19 Apr 2014 02:16 Post Subject: cash in policy my father gave me

I am on disability and I cashed a policy my father gave me in 2012 he had it since I was a baby he was the beneficiary and borrowed 7000. never made a payment I cashed it & gave it to my mother to do Home repairs so I can move in with her she also bought me a 3000 Truck 1991.. She has paid me back in more ways than one . The policy was cashed in june of 2012, The Irs reported it to SOS and they may take my ssi away. The total amount of the policy was 11000.

Posted: 19 Apr 2014 07:36 Post Subject:

And did you have a question? When you surrender a life insurance policy for its cash value, the amount you receive is considered income. Not the entire $10,000 face amount of the policy, only the $3000 you actually received.

Posted: 27 Aug 2014 07:46 Post Subject: selling insurance policy

I became disabled in 2004 I had two policies both for 50 k
One term life one whole lifeWhen I became disable
I had a disability clause in both policies they are paid up
I have two more insurance policies and I was wondering how to sell these two that are paid up and if I can

Posted: 27 Aug 2014 09:43 Post Subject: Life insurance

I have a 40 year old life insurance policy that I did not know my father took out on me he has passed away they told me the policy is worth 10,000 what are my options to do with this policy?

Posted: 28 Aug 2014 06:59 Post Subject:

Reply to Dannys truck . . .

Your policies are highly unlikely to be marketable -- they are only valued at $50,000 each. In the "life settlement" market, first, term life policies of any amount are almost never purchased, and, second, most other cash value policies are unlikely to be considered unless the face amount is well in excess of $1 million, each.

You may have other options available. Contact me for more information.

Posted: 28 Aug 2014 07:01 Post Subject:

I have a 40 year old life insurance policy that I did not know my father took out on me he has passed away they told me the policy is worth 10,000 what are my options

The policy may have a "face amount" of $10,000, but if that's true, the policy today will not be worth anything close to $10,000. Who is "they" and what exactly did "they" say?

Posted: 30 Sep 2014 08:53 Post Subject: Cash Surrender Of Whole Life Policy

]I have a group universal whole life insurance policy for 38.000 that has been in effect since 1975. If I decide to do a cash surrender on this before my death would I get this $38.000 face value in cash?

Posted: 30 Sep 2014 10:26 Post Subject:

If I decide to do a cash surrender on this before my death would I get this $38.000 face value in cash?

The $38,000 amount is ONLY payable to a beneficiary (or your estate if you have no surviving beneficiary) following your death. Your surrender value is the amount of money residing in the cash accumulation account, and is included in the $38,000 death benefit, assuming your group policy uses the Option I "Level Death Benefit" selection.

If you do not have your most recent account value statement, you can call the insurance company directly to obtain that information. Group UL will not accumulate much cash value unless you are contributing premiums on a regular basis.

Posted: 20 Nov 2014 06:31 Post Subject:

If you want to surrender your life insurance policy, then you can ask to the company regarding this, or I think you can also write the cancellation letter to the life insurance cancellation department.

Posted: 23 Dec 2014 12:31 Post Subject: life insurance question

I've had a life insurance policy over 10 years that I have paid off. Now i asked my agent could i cash it out last year but he told me i was unable to i knew i could but didn't think to much of until me and a coworker was talking and she said i could. Now i called my company 1800 number gave me the run arounds about my policy at first but finally i spoke to customer service agent and i was told my policy had already been cashed out a year ago and i told her i was not aware of that and i did not cash my policy out i feel like it was done by somebody in the company cause there is know way i did it what should i do.

Posted: 21 Feb 2015 03:22 Post Subject: Surrender request form

I am 68 years of age wanting to withdraw the balance of ending cash value of $3,000.00 for personal debt payoffs. I have had this policy since May 28, 2005. Would like a form to download for withdrawal request. Also is there a penalty for this withdrawal?

Posted: 06 Mar 2015 03:13 Post Subject:

Would like a form to download for withdrawal request. Also is there a penalty for this withdrawal?

Your insurance company can answer both questions.

Posted: 10 Mar 2015 04:19 Post Subject: Universal premium life

A lot of good comments on here. I have a question about my own policy. It's a universal life policy. I'm 36, started the $250k policy at age 31. I pay $165 per month and don't want to pay on it because I'd like to put the money for in my 401k each month instead. My employer has term insurance for $250k for about $3 per month. Basically free. I've paid roughy $10k into the policy so far and I'm wondering if I even made the right choice of buying it.

Any advice on what to do with the policy with the cash value being what it is?

Posted: 10 Mar 2015 04:22 Post Subject:

Any advice on what to do with the policy with the cash value being what it is?

Cammy . . .

You don't even mention what your Cash Surrender Value is. And I think you must believe it is equal to your $9900+ in premiums paid to date. It most assuredly is NOT that much. Perhaps $3,000-$4,000 at most. But you won't get all of that if you terminate the policy today.

There are several things to consider before simply surrendering your policy.

First, your employer-sponsored life insurance only lasts as long as your employment. If you terminate (or are terminated), you will have the right to continue to be insured, but not with low cost term. You would have to start a new whole life, or more likely, UL policy at your then-current age, which would probably be the same or higher cost compared to what you now have privately. Most agents, including myself, counsel folks who need life insurance but are only insured through an employer-sponsored plan to obtain an individual policy, like you have done. But not necessarily a UL policy.

Second, your UL policy has surrender charges (for up to 15 or 16 years) that will eat into a substantial portion of your cash value at this point. You must read the contract to know how much you will lose by terminating your insurance now. However, whether you obtain new insurance through your employment (probably only available during an open enrollment period, which might be several months away from now) or not, you should not terminate your existing insurance without something to replace it in force first. A 30-year $250,000 level premium level term life policy for someone your age would probably cost between $350 and $450 per year. At age 66, if you still needed life insurance, to continue the term policy would be very costly because it would then be "annual renewable term", and the first year could cost up to $10,000 (and would be higher each year after that).

Third, your UL policy has the same problem built into it -- not at age 66, but beginning at age 31. You need to obtain an INFORCE illustration from the insurance company to see exactly how well the $165 premium is funding your policy today, and for the future. UL only works properly when maximum funded in most of the early years, and $165 per month is not maximum funding for such a policy. It may not be entirely sufficient, in which case you would have to decide whether to bite the bullet and terminate your policy or pay more money to manage it properly. You have to reevaluate a UL policy each year when the company sends you the Annual Statement (or Report), and determine whether you can continue paying the "planned premium" or if you need to pay a higher amount..

Don't make any rash decisions until you have considered these things, and more.

For example, you don't even indicate what your need for insurance is. Are you married, single, a parent? Who would be financially harmed if you died today? And to what extent?

How did you decide to purchase $250,000 of insurance at age 31? Did an agent convince you that putting money into your 401(k) was not as beneficial as putting money into a IRA or employer-sponsored retirement plan. It's possible that you could have the basis for a lawsuit to recover your premiums.

There are many factors which are not seen in your post that are important when it comes to making decisions about life insurance needs and coverage types.

Posted: 09 Apr 2015 01:42 Post Subject: Surrender my Whole Life policy and invest proceeds?

I am 75 yrs old and my $60,000 whole life policy has a surrender value of $27,000 right now, but according to the Insurance Company projection my policy will lapse to $0 value in 13 years when I will be 83 due to the increasing "cost of Insurance".
I am in good health and otherwise financially secure. I think in my case it might be wiser to invest the proceeds of the policy in a blended mutual fund and continue to make contributions to the fund monthly, equivalent to my insurance payments.
What do you think?

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