Universal Life Insurance Policy

[reenwad]

Hi - I'm new here, and have a question about a universal life insurance policy I have. I got talked into it by my insurance agent that insured my cars and home. Husband now has one too.

So, I just received a notice of premium due after not paying for a few years.

As of April 2015, ending cash value was $18,817.70
Surrender value is $17,019.15.
Last statement showed an interest rate of 4% for April 2014-April 2015.
Guaranteed interest is 3%.

Should I keep this policy, or is there something better I should be doing with the money?

Can I transfer the money to my Simple IRA that I have through work?

I have no other life insurance, no other real savings other than the IRA through work, and don't want to deal with this shady insurance agent anymore! He really did a number on my place of employment, and I just don't trust him anymore!

I'm 47 years old, and don't see myself being able to retire.
Any advice you may have would be helpful. I just don't know what to do!
Thank you!

[dczech09]

Do you have any retirement savings at all? What about debt? General savings (emergency fund, vacation, etc)?

What about kids? Do you have any kids at home?

My inclination is to advise you to get a term life insurance policy in place, then cancel the universal life policy. But this is dependent on your financial picture, as well as family picture (age of kids, number of kids). Unfortunately, without knowing more about your situation, I cannot make a complete accurate suggestion so please take all of this with some salt.

You cannot transfer your universal life insurance cash value to an IRA. The two systems are completely independent of one another. Especially an employer-sponsored SIMPLE IRA.

Universal life insurance has not been your friend. At 47 years old, the cash surrender value is only $17,000... Ouch. Only a 4% average annual return, while the stock market has returned more than twice that amount since the 1950's. Good thing you fired that adviser!

Keep in mind that this is with limited information...
I recommend getting term life insurance (20 year term) in place, then canceling the universal life policy. The death benefit of the term life insurance should equal 10 to 12 times your annual gross income.

You should be investing at least 15% of your gross income for retirement. Whether that is through your SIMPLE, a 401k, 403b, Roth IRA, taxable brokerage account, etc, you and your husband should both be contributing 15% of gross income towards retirement. Nine times out of ten, the universal life monthly premium is several times what the term life monthly premium is, so by doing the insurance change you should free-up some cash flow which can help you achieve this goal.

I hope this helps!

[reenwad]

Thanks dczech09!

We have no children.
Have minimal savings of about $1500
I have a Simple IRA, and husband has a 401K.
(Gonna start investing more!)
House mortgage, and about $20,000 in second mortgage and credit cards for debt.

When you say "cancel" the universal life policy, how do I do that? Do I have to call the jerk insurance agent?
What happens to the money I've put in?
I'm sorry I'm so clueless.

[dczech09]

Thanks dczech09!

We have no children.
Have minimal savings of about $1500
I have a Simple IRA, and husband has a 401K.
(Gonna start investing more!)
House mortgage, and about $20,000 in second mortgage and credit cards for debt.

When you say "cancel" the universal life policy, how do I do that? Do I have to call the jerk insurance agent?
What happens to the money I've put in?
I'm sorry I'm so clueless.

Based on your situation, I would recommend getting a term life insurance policy for 20 years that equals 10X your gross income. Your husband should do the same.

The life insurance will ensure that the survivor will have money to live off of and pay the bills if one of you passes unexpectedly. I know that's kinda dark, but that's life insurance! It is a dark topic.

Once the term life insurance is in force, you will need to call the "jerk insurance agent" and ask them to cancel the universal life policy. They will try to talk you out of it, but just stand your ground and they will need to do as you wish (it is their job and they can get in huge trouble if they refuse). Do not accept any of his projections or any of his pleads. Just stand your ground and it will be over before you know it.

Once the universal life policy is canceled, they will cut you a check for the $17,000 cash surrender value.

Keep enough of that money to make your emergency fund equal 3 to 6 months worth of expenses. Should you go with 3 or 6 months? That really depends on what you think. If you have "stable" jobs, then I would go with 3 months. If one of you is on commission, I would go with 6 months.

Be sure to invest 15% of your gross income for retirement, stick to a balanced budget, and use any extra income in your budget to beat down your second mortgage, credit card debt, and mortgage.

The name of the game will be to pay off your debts as quickly as possible, and invest for retirement. Once your debts are gone, you can increase the retirement savings rates to be greater than 15%. This will help you get to a stable place for retirement (which is still within reach). Keep in mind that retirement can still mean "work" if you want it to!

[FLA]

Keep in mind that this is with limited information...
I recommend getting term life insurance (20 year term) in place, then canceling the universal life policy. The death benefit of the term life insurance should equal 10 to 12 times your annual gross income.

my ex insisted on whole life insurance, he didn't even know there was such a thing as term. We had it for 2 yrs and then I set my foot down and switched us to term. I have yet to hear a compelling argument for anything but term.

my dad has a rare mitochondrial disease that has affected his organs starting in his 30s. IDK if they even had term back then but he's stuck with his whole life policy and my mom's because she has an end stage disease, neither could've gotten reasonably priced insurance after their diagnoses. So they kept it but I wonder if cashing it out and investing would've been better than throwing good money after bad all these decades.

[disneysteve]

The answer to "What kind of life insurance should I get?" is never, never, never whole life.

Buy term. That's all you need to know.

OP, I would get term and then, once the term policy is in your hands, cancel the whole life.

Whole life is a scam and rip-off.

[reenwad]

Thank you SO MUCH for the response! I'm gonna do exactly what you said.

[reenwad]

OK, sorry. One more question.

I asked for a 20 year term policy for $100,000.
That's not 10x my gross income, but I think it'll be enough.

So, my question:
If I don't die in the next 20 years, (I'll be 68 then) what happens in the end?
Do I just not pay anymore and hubby gets $100,000 when I do eventually die?
Or does it renew and I keep paying the annual sum?
Or will I have to get a new policy? And if so, won't that be pretty expensive at that age?

Thanks again for all your help!
Got a quote for $464 annually for $100,000.

[FLA]

OK, sorry. One more question.

I asked for a 20 year term policy for $100,000.
That's not 10x my gross income, but I think it'll be enough.

So, my question:
If I don't die in the next 20 years, (I'll be 68 then) what happens in the end?
Do I just not pay anymore and hubby gets $100,000 when I do eventually die?
Or does it renew and I keep paying the annual sum?
Or will I have to get a new policy? And if so, won't that be pretty expensive at that age?

Thanks again for all your help!
Got a quote for $464 annually for $100,000.

at 68 your premiums will probably sky rocket, if you don't renew DH gets nothing. But by 68 you should have other assets to cover DH besides insurance and you can cancel. He is unlikely to need your insurance because of loss of income (you'll probably be retired), you don't need to leave him money to support children, your house should be paid off and your assets should cover your funeral. Mine sky rockets to 6k at 64, I will be canceling then.

your payment seems high to me, I pay $500 for $300000. I use Amica

I didn't do 10x my annual income because I had higher assets to leave my kids in my 403b and a share of a house. Plus, divorced from ex who could handle their needs easily on 300k. If I was in a dual income couple, I would have more