Any Reason to Keep A life Insurance Policy

[Fishindude77]

When I was in business, my partners and I had the company life insurance for each of us, in the event that one of us died, some funds would be available to help buy back the stock and pay off the spouse. When we sold the company, each of us took our policies and they are now in our names. Mine is a $150,000 policy with a cash value of roughly $69,000. It generates near enough interest off the value to make the premium payments but I see no real need to have it.

We are retired 60 & 57 years old, financially solid with plenty of liquid assets, and it's just my wife and I, kids are raised and on their own. I see no reason not to just cash it in and put the money with our other investments, the only downside being some of it will be taxable income. Am I missing anything?

[kork13]

Follow your gut.

The policy is irrelevant, and I guarantee you can make more on $69k than you're effectively getting by having it pay for the insurance premium (I'm guessing ~$2k-$3k/yr?) Invest that money in even just a basic S&P index, and you'd probably earn double that.

Besides, there likely will be very little in the way of taxable income. Cash value policies are assessed for taxes with your total premiums paid in over the life of the policy as the "investment basis." With the fees & actual insurance premiums, you're likely either roughly even, or in the hole. The insurance company should be able to provide you with your basis (total premiums paid). I expect that you'll be surprised/dismayed by those numbers.

[disneysteve]

Dump it as soon as you can. Don't waste another dollar on this.

And this won't be a taxable event. Whole life isn't an investment. It generates no profit. In fact, you lose money due to ridiculous expenses. There is zero reason to maintain (or even have) a whole life policy.

What the business should have done back when this started was to get a 30-year term policy on each partner, not a whole life policy. It would have been way cheaper for far more coverage.

[Fishindude77]

What's right or wrong in regards to if it was a good purchase really means little, and I've not paid any premiums personally yet. It's basically inherited money to me.
Just sent in the surrender form.

[disneysteve]

It's basically inherited money to me.
Just sent in the surrender form.

Not a bad thing at all. How long was the policy in effect? There is typically a surrender fee that decreases each year for a certain number of years. If the policy is still in that period, you might lose a bit to that fee.

[kork13]

What's right or wrong in regards to if it was a good purchase really means little, and I've not paid any premiums personally yet. It's basically inherited money to me.
Just sent in the surrender form.

Cool deal. FWIW, the basis will still be based upon the premiums that the company had paid in, and what the insurance policy itself has covered.

But it sounds like this policy has been in place for a number of years, and typically those surrender fees die out after ~5-8 years, I think... So hopefully shouldn't be a factor.

$69k....isn't that about the cost of doing one of those around-the-world cruises?

[disneysteve]

$69k....isn't that about the cost of doing one of those around-the-world cruises?

That's my #1 bucket list item, the Holland America Grand World Voyage.

[Fishindude77]

$69k....isn't that about the cost of doing one of those around-the-world cruises?

A big cruise wouldn't be my cup of tea, but you can bet we can find a way to have some fun with it.