I’m 7 years into my whole life plan. I thought it was 1.5M, but it converts into $300,000 once the term ins runs out in 4 years. I pay 5k/yr and my work situation has changed as such that it is now 10% of my income (the $5k). Also, I’m 50 yrs old, so I have a while to keep paying assuming I stay healthy. I could surrender and get approx $50k out. I had put in $150k, plus the $5k I have paid yearly which will be lost if I surrender. $300,000 is not much, to keep paying is putting a strain on me, and I could invest the $50,000. However, I feel sick to lose my $150,000. Thoughts?
Should I cancel my whole life insurance?
byu/jenethridge inpersonalfinance
Posted by jenethridge
14 Comments
Whole life bad: https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/. https://www.whitecoatinvestor.com/what-you-need-to-know-about-whole-life-insurance/
Debts/liabilities/dependents?
Hard to see any situation where continuing to own this policy is a good idea.
Why do you have life insurance? Provide for your kids – how old are they? Spouse? Any other assets?
So current value is $50k
But if you pay $20k more ($5k/y for 4 years) the value becomes $300k?
Rare situation where it makes sense to keep, potentially?
Though please do not get swindled into whole life ever again. And be an advocate against it to anyone who will listen.
The $150k is already lost. That’s why people don’t recommend whole life insurance, because it’s such a terrible rip off. Cash it out, put the money in a 401k/IRA and invest it in the stock market. Get cheap term life insurance if you have dependents.
Look at the surrender value over time and see how much it will increase. Calculate whether that amount, plus the $50K surrender and $5K/yr you add would exceed market returns. Do you actually need life insurance too?
So it’s currently $50k. If you keep paying for another 4 years, another $20k, it’ll be $300k, with no risk? Do you have another investment where, with no risk, you can turn $50k+$20k into $300k in 4 years?
Look into getting a 10 or 20 year term plan.
And wait you “put in” $150k AND you pay $5k/yr?!?
Do you have the ability to do premium offset or Reduced Paid Up option so you can potentially put less into the policy and it still sustains?
Yes. Cancel it today. There is nothing you can do about the money that is already lost but those policies are rarely the right fit for anyone, you included.
Could OP be more clear on everything so we can help you?
You invested $150k?
Your annual premiums are $5k?
If you withdraw now you get only $50k of your original $150k back.
But if you wait 4 years and pay another $5k/year ($20k total) you get $300k back out?
So you will have paid in $150k + [$5k x 11] = $205k and be able to withdraw $300k if you stay in?
If this is correct I would stay in because the value of paying $20k more is $250k.
But whatever this is don’t buy it again!
If you had simply invested your $150,000 in an S&P 500 index fund in 2018, it would be worth more than $400,000 today, without any additional premiums.
Yep, PSA to everyone: As a rule, if you have to ask, Whole Life Insurance is bad for you, guaranteed.
It supposedly works for the estate planning of ultra high net worth individuals. But those people presumably know what they’re doing, and don’t have to ask.
Anyone who disagrees with this is either ignorant, sells whole life insurance, or owns whole life insurance and is coping about making the wrong choice.
Get the 50k and invest it, In 15 years, that 50k becomes 120k if the S&P 500 continues to have its historical returns.
Get a 15 year term life insurance assuming you have kids or a mortgage. Assuming that is when the kids will be out of college by then/mortgage will be paid off by then.
Short answer: Yes
Long answer: Do it today. That product is crap and the happiest day of my financial journey was when I canceled my whole life plan. I paid into one for 1.5 years as a college kid with no assets or family to protect. When I canceled I got back about 25% of what I paid them and felt lucky to even have that.