by Guest » Tue Dec 23, 2008 12:23 pm
I have a small whole life policy that I took out many years ago. The policy will be paid up in 2013. I currently have a premium that is due.
What are my options (other than paying until 2013) and the pros and cons of each?
Thanks.
What are my options (other than paying until 2013) and the pros and cons of each?
Thanks.
Posted: Tue Dec 23, 2008 01:03 pm Post Subject:
Well, JustAskin...I'm JustTellin' there tain't no way of sayin' without more information.
What your JustAskin is so non-specific as to not have any way to answer.
What does small mean?
To me any death benefits at or under $100,000 is small.
AND are you sure it's Whole Life and not Universal Life?
Paid-up based on what? Guaranteed Values or Current Assumptions?
The "pros" of keeping your policy in-force will mean your beneficiary will receive the death benefit when you die. Is that still important to you? Once the need or desire for the death benefit evaporates there isn't much sense in paying the premium except for perhaps final expenses or estate liquidity.
Now I'm not being harsh....I'm JustSayin' what you're JustAskin' isn't relative to anything without specific policy information.
Merry Christmas
Posted: Tue Dec 23, 2008 02:39 pm Post Subject:
The policy value is $10,000. I took it out in 1969 so I'm pretty sure it is whole life. A couple of years ago, I contacted the company and asked how long the premiums continue on this policy and they told me that it would be paid up (whatever that means) in 2013. I would assume that this policy has a cash value of nearly $10K since I've been paying on it for nearly 40 years.
I guess what I'm really asking is can a policy like this be cashed out before death?
Thanks for your help.
Posted: Tue Dec 23, 2008 03:37 pm Post Subject:
I guess what I'm really asking is can a policy like this be cashed out before death?
Yes, and many times this may be to your advantage as most of the death benefit at this point in a 40 year old policy is nothing more than your cash anyway.
I would say if your cash value is $7,000 or more you may want to take a hard look at some financial alternatives since it appears to me the need for the $10,000 death benefit has evaporated over the years and at this point your premiums are only going to pay for the difference between your cash in the policy and the policy's death benefit and of course to fund the cash value.
I'm NOT saying that's bad, just stating facts.
Just be aware that if you cash out the policy and realize a gain you will owe Federal Income Taxes on the interest earnings. You could 1035 exchange the life insurance for an annuity and avoid taxes on the gain.
The down side is that the beneficiary now pays tax on the deferred growth of the annuity where the death benefit paid under the life insurance policy would be received tax free to the beneficiary.
But, your cash may grow better in an annuity than in the life insurance policy since there wouldn't be any deduction for life insurance in a Fixed Annuity.
If you post the specific dollar amount of your cash surrender value I'll run the numbers with a 5 year guaranteed product that pays a 10% premuim bonus, just for fun, to see how the numbers compare.
Merry Christmas!
Posted: Wed Dec 24, 2008 03:38 am Post Subject: insurance
GARY.............different things I've read on Term LIFE and Whole LIFE are confusing to me. The OP said he/she is paying on a WHOLE Life policy. I thought that means exactly what it says : TERM ( paying on it for a certain amount of time) WHOLE ( paying on it for 'life'). How can a WHOLE Life policy be paid within a certain 'term'? ( Hope I'm expalining myself here). Also.......can you please claify the difference about Whole Life and Term Life VS. Universal Life? ALL of this can get confusing. Thanks.
Posted: Wed Dec 24, 2008 11:34 pm Post Subject:
To my understanding, paid up is an option where the policyholder has the choice to discontinue the premium payment but enjoy the reduced sum assured till the policy matures. Paid up option is possible if the policy has accumulated cash value.
Before we can offer any suggestion, may we know what was your age when you got this policy?
Posted: Fri Dec 26, 2008 01:53 pm Post Subject:
sdchargersfan wrote:
Also.......can you please claify the difference about Whole Life and Term Life VS. Universal Life? ALL of this can get confusing.
SD' there are only two forms of life insurance,.... Term or Cash Value.
There is nothing else.
Everything else is just a financing mechanism and marketing.
The purpose of cash value life insurance is to keep your premiums level and have your own cash offset the fact you're getting older each and every year.
Since YOUR cash in the policy becomes part of the death benefit, in my example above, a $10,000 death benefit on a 40 year old policy with $7,000 cash value means the insurance company is at "risk" to pay out $3,000 when the person dies. The balance of the death benefit paid is nothing more than the person's own money being paid to the beneficiary.
Term insurance doesn't have the cash value offset to your own mortality. They simply charge you more money as you get older.
Many times with life insurance the DISTINCTIONS ARE WITHOUT A DIFFERENCE. Leading to confusion.
Would you prefer to drive to work today in the cheap car or would you rather use the expensive automobile?
Do you see what I'm taking about?
The issue is transportation to work.
Both the cheap car or the expensive automoblie will get you there.
Posted: Thu Jan 01, 2009 02:09 am Post Subject: Reply to JustAskin
JustAskin,
If you want the cash you can cancel your insurance and take the cash. If you receive more than you paid into it, you will pay income taxes on the gains. However, I doubt you have you have much of a gain if any, so I wouldn't worry about that.
I'm guessing you probably aren't interested in the 10k death benefit anymore and you would just rather take the cash. Is that right?
If you are interested in using the cash value to purchase another policy with a higher guaranteed death benefit... let me know and I'll run some numbers for you. You can take the cash value and buy a paid up policy right now and never have to pay another penny again.
Posted: Mon Jan 26, 2009 03:04 pm Post Subject:
I finally got the requested info. from AIG. Hopefully this will fill in all the missing blanks.
- I took out the policy at age 20 and am now 61
- The Net Cash Value is $5,960
Since the cash value is only 60% of the policy face value and I don't need either the insurance or the money right now, I assume it would be wise to keep the policy.
The annual premium is $146 and there are 5 years left before it is paid up. The interest rate is 5.5%. Would I be better off using the cash value to pay the remaining premiums or pay them out of pocket.
Thanks.
Posted: Mon Jan 26, 2009 03:22 pm Post Subject:
What are your goals? Do you want to just keep $10k of insurance? Do you want more ($50k? $100k? $250k?)....most people's circumstances have changed greatly over the course of 40 years and it is impossible to say what you should do without knowing what your goals are. If you are looking to increase your insurance, you should do a 1035 exchange (tax-free) to a new policy to lower your annual premiums. If you wait another 4 years to do this, your premiums would be substantially higher due to your age.
Posted: Mon Apr 06, 2009 12:31 am Post Subject:
"GARY.............different things I've read on Term LIFE and Whole LIFE are confusing to me. The OP said he/she is paying on a WHOLE Life policy. I thought that means exactly what it says : TERM ( paying on it for a certain amount of time) WHOLE ( paying on it for 'life'). How can a WHOLE Life policy be paid within a certain 'term'? ( Hope I'm expalining myself here). Also.......can you please claify the difference about Whole Life and Term Life VS. Universal Life? ALL of this can get confusing. Thanks."
You're close. Term and Whole doesn't refer to the premium payment period. It refers to how long the death benefit stays in force. Term insurance has a death benefit that is temporary. Whole Life insurance has a death benefit that is permanent. Some whole life policies have premiums that need to be paid forever. Other policies can be completely paid up after just one premium.
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