by Guest » Fri Oct 11, 2013 09:44 pm
What to do? I'm 71 and in good health. I'm insured for $500,000 with a policy that I paid very high premiums on up front ($4705 a year), but have paid no premiums for many years now. If I do not pay another premium, the death benefit will expire when I'm 82. Even if I could afford to resume payments, it would still expire when I'm 86. If i reduce the benefit to $100,000 or even $250,000 will it significantly extend my eligibility? If I surrender it and take the cash value, which is more than $50,000, might I get a better insurance deal with that money?
Posted: Sun Oct 13, 2013 02:53 pm Post Subject:
If i reduce the benefit to $100,000 or even $250,000 will it significantly extend my eligibility?
"Eligibility" for what? You are probably asking about the longevity of a universal life policy.have paid no premiums for many years now.
What you apparently have done is believed someone who once told you your policy would pay for itself and then never paid any attention to what your annual statements were telling you. Given the sad state of affairs as far as policy interest crediting rates is concerned, your policy cash accumulation probably eroded very quickly in the past 6-8 years. But it's been eroding almost the entire time you did not pay premiums. It may have been growing initially, but that was only temporary.I analyze policies like this all the time. An in-force illustration can probably be run to show the results of what you are asking about, assuming your policy permits it -- a UL policy will have a stated minimum death benefit you cannot reduce below, and sometimes that amount is the original face amount of the policy, and sometimes it's much lower.
But . . . you would not want to make a decision about that without an independent analysis, because an in-force illustration will do the same sort of thing your original illustration did many years ago -- make assumptions that the future will be the same as things are today. And no one can guarantee that. They tell you so in the illustration. You have to look at the worst-case scenario instead, which is in the "Guaranteed" columns, not the "Non-Guaranteed" columns that get your attention.
If I surrender it and take the cash value, which is more than $50,000, might I get a better insurance deal with that money?
NO! You're 71 years old. You may be in good health, but you are old. The cost of insurance is enormous at your age. What will $50,000 buy you as a single premium paid up policy with another insurance company? You can't know without applying for insurance to find out. Could be $100,000, could be $75,000, could be $150,000. It won't be the $500,000 you already have.Your policy undoubtedly has NONFORFEITURE options such as "reduced paid-up" insurance and "extended term" insurance in addition to the cash surrender value. Those are also viable options. Reduced paid-up will continue your coverage to age 100 without additional premium. The amount of death benefit will be whatever your $50,000 will buy at your current age with the same company. That's a much better starting point. It may not be the best answer, but it is available without new underwriting.
If I do not pay another premium, the death benefit will expire when I'm 82. Even if I could afford to resume payments, it would still expire when I'm 86.
You're talking about the $500,000 death benefit amount. You can always ask for another in-force illustration to show how much premium you need to pay to guarantee the policy continuing to age 100. That amount will not be pleasant news, but it will give you an indication of how costly life insurance is at your current age.Your other alternative is to beat the insurance company by dying first, but that's not what I'm recommending.
If you don't have an agent to work with whom you believe is reliable and you need someone to assist you with a policy analysis, you can contact me directly.
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