Whole life insurance dilemma

[anastasia-b]

Disneysteve,

Great advice. Thank you. I will prob want to keep some of that 7K "liquid" since I am working toward funding my EF to 3-6 months of living expenses.

[arthurb999]

Cancel it, it's junk. Age 31, I got 450K 20 year term for 24.52/month... though work.
Dump it.

[disneysteve]

Disneysteve,

Great advice. Thank you. I will prob want to keep some of that 7K "liquid" since I am working toward funding my EF to 3-6 months of living expenses.

I would not consider the cash value of the policy to be liquid for the purposes of an EF. As you've discovered, actually getting to that money can be difficult and time consuming, not what you want for your EF.

Get rid of the policy. If you mother really feels strongly about you being insured, buy a cheap term policy. Put the $7,000 in savings and move on.

[anastasia-b]

Disneysteve,

Sorry about that, I should've been clearer. I meant, when I cancel the policy and have that check for 7K, I don't want to put all of it in stocks. Some will be in a liquid savings account.

[disneysteve]

Disneysteve,

Sorry about that, I should've been clearer. I meant, when I cancel the policy and have that check for 7K, I don't want to put all of it in stocks. Some will be in a liquid savings account.

Got it. I think that sounds like a good plan. Don't let the salesman talk you out of it this time.

[snafu]

Since rates on CDs are low, 1st check with Agent to determine the rate of return and dividend pay-out date on your whole life policy being paid out for 2008, 2009. Run the figures to see rate of return on $7K.

Start your new plan, working out a sum for EF appropriate your employment risk ratio in a good Money Market instrument. Add the $338. that you no longer pay for insurance to laddered CDs or whatever you ultimately choose. Given your age and depending on your risk tolerance, this might be an opportunity to make gains on the stock market over the next 5 years.

Perhaps you could ease the problem with your mom by explaining the value of term insurance. Has she been pouring commissions into a sales agent pocket for years and years and years?

[wincrasher]

I can't think of a more horrible investment. Paying in for 32 years and the cash value is so low? Passbook savings would have had a higher yield.

Who is getting the interest on the loan you took out? Does it pay back into your policy or go to the insurance company? If it does, just eliminating this interest makes it worth cashing out.

[poundwise]

I'm posting only to echo Steve's remarks. He's right on with his advice about this.

[anastasia-b]

I just want to put his up for clarification:

This. Is. Not Hinging. On My. Mom's. Appoval. Amen.

But, i thank you for your input. I do sincerelyappreciate it.

Wincrasher, I agree with you. If I had a time machine or a Delorean I would go back, and undo the policy.

I think that Disneysteve had a good point. Finally someone sees the point I was trying to make. Thanks.

Still cancelling my policy in May when my premium comes due.

[bigijim]

Life insurance is for survivors

The only real reason for having life insurance is to protect against the loss of income if there are survivors that depend on your income. The type of life insurance policy your parents bought for you are pretty much a thing of the past. They were sold by old school insurance salesmen to create a customer for life. If you can get a copy of Charles Givens book "Wealth Without Risk" at a library, he does the best job of explaining why Whole Life is about the worst insurance sold.

With Whole Life there is no transparency. You have no idea what is taking place in the policy. It is essentially a term life policy which decreases in face value each year as your cash value increases. At some point the policy cash value equals or exceeds the internal decreasing term policy and the insurance disappears. If you look at the death benefit clause in the policy you will find that the policy pays either the cash value or the face value not both.

Also if you are not paying on the policy at this time the premiums are still being made out of the cash value side of the policy in the form of a loan with interest which compounds just like a credit card. This will take place till the policy expires or you will have to pump substantial cash into the policy. Taking a loan against the policy creates a situation where if you die the loan and all interest due will be deducted from the policy's death benefit. That is spelled out in the loan section of the policy.

Check out what Suzie Orman has to say about this type of insurance The definitive source about this is the book "What's Wrong With Your Life Insurance" by Norman F. Dacey. Term life insurance is the way to go if someone need life insurance. It is cheaper cost than cash value or permanent life insurance. Life insurance should not be permanent. We need insurance during out earning years when others depend on out income but in the end we will need cash. My mother outlived her money and became my dependent in her last years. She has life insurance but its growth did not keep up with long term inflation.

There better uses for your cash in your policy. There are better places to grow your money than in an insurance policy. In 1979 The Federal Trade Commission report on life insurance rates of return said Whole Life policies were the worst investment available to consumers.

[wincrasher]

Actually, if you had a Delorean, you could sell it and have more money in your pocket. They are quite collectable.