Handed over flexible universal life policy

[bethasaver]

Hi there. My parents, like many parents in the 80's and early 90's purchased a universal life policy for me as a child. They paid the premiums then handed it over to me a couple of years ago. I'm 31. The premium is 9.95 a month. It's a $50,000 policy.

Now, I understand to never actually buy myself whole life insurance. I only have bought term in my life, but I have this thing and for every article I can find about why I should sell it I find another saying why I should keep it. I have an old statement, but the cash out value is around $1,000. It says that assuming premiums are paid this policy will continue in force until 8/8/2051. I know Suze would say "are you kidding me?! cash this in and buy term". But, I remain confused. What do I do with this thing?!

I know that I'm under-insured with term so as soon as open enrollment through my work lets me in November I plan to significantly increase it. I currently have 2 $25,000 policies. I know I need lots more but not sure how much. I have 2 kids ages 12 and 8 and I am the primary earner in my home so would like to have this beefed up at least until the kids are no longer dependents. Please help?

Thanks,
BethASaver

[breathemusic]

I actually have the same issue. The policy was bought for me when I was born, turned over when I was 18 (I'm 25 now) and I've been paying on it ever since (premium is about $520 a year). I'm curious... would it actually be worth it to wait until the interest that I can earn on my policy is less than the interest that I can earn if it was in savings to cash it out? I don't have any debt other than school loans which I'm paying off early already through a work program (or just slowly paying off early so I don't potentially ding my credit). I have an EF so all I'd really do with the extra money is throw it in my savings account which I'm building up toward an eventual house payment in the future when I decide I want to buy.

My life insurance guarantees me somewhere about 4.5-4.7% (can't remember off the top of my head) and the fees to manage it are actually pretty low every year. My savings is getting like 0.8% interest. So why not just wait to cash it out until interest rates are better? Am I missing something?

[jpg7n16]

Step 1: are you still insurable? If no, then keep it
Step 2: figure out how much coverage you actually need, and over what timeframe you need that coverage
Step 3: figure out how much coverage is available through open enrollment, at what cost
Step 4: compare that vs coverage in the open market

In most cases, you should cash in the policy after you are covered through an appropriate term policy.

Once it's cashed in, use it to pay down high interest rate debt, or put into an IRA for your retirement.

[bethasaver]

I am still insurable yes. The benefit of getting the insurance through my employer is the group rate benefit plus pay for it with pre-tax dollars out of my check. It's through the Hartford company. I can take that with me if I no longer work at my company anymore. My youngest is about to turn 9 so I'd like a 10 year term since I primarily support my kids. The rate is $.08 per thousand dollars of coverage.

[Oquote]

The cost of insurance (internally) should weigh heavily on your decision. Although I myself have all term insurance, ironically, I have been an insurance broker for more than 30 years.

My gut instinct is that you should keep it for diversification. Remember...it's only $10 per month and you can handle that rather easily right now (I assume).

[bethasaver]

Thanks! I did decide to keep the policy. It is guaranteed to earn 4.5% and premiums won't go up until I'm 55. The policy is good til age 95. So, I see no benefit in cashing this thing unless I feel I can invest it for higher earnings. I also got a low quote for 10 year term so I think I'm good to go! I really will feel so much better once I know I'm properly insured