Should I Cancel My Whole Life Policy?

[JohnWalker]

and how much do you get if you cash it out,,,,,

You know I'm not sure. Maybe you can help me make sense of this:

I don't understand the cash value and paid up insurance columns. My premium is like $299 / year but I assume "paid up insurance dollars" is the amount I've paid for the policy over the years but those numbers don't add up.

I also have no clue what "extended term ins yrs days" is haha...

 

[FRJ]

That State Farm agent did one helluva job explaining things to you!

Cash Value is what you would receive if you were to cancel the policy - corresponding to when you cancel.

Paid Up Insurance Dollars - if you instead settled the policy (stopped paying premium on the policy and settling for whatever death benefit has been "paid up" for as indicated under this column). You have to notify the insurance company, otherwise they will use the cash value to pay for the ongoing premiums.

I'd say keep the policy, it's not the greatest but you'll probably be happy to have it when you're past retired.

 

[STIBROKER]

I don't understand the cash value and paid up insurance columns.

JUST call statefarm and ask them what your current cash is if you canceled your policy today.....

 

[L5tc]

I agree keep the policies. Although you should find a good insurance agent to read the policy and get an inforce to see what's going on. You're so young. A good agent will check policy expenses and see how the premium was derived.

Those things are complicate but can be a great tool in your financial life.

Yes Primerica agents run around telling people to get rid of cash value insurance and buy mutual funds. That's why Primerica was mentioned.

 

[JohnWalker]

Thanks for everyone's input. Here is the part I don't understand. If I kept paying these premiums until the age of 70, I would have paid about $35,000 for a policy that only has a death benefit of $50,000. I don't really feel like that's a good value. Am I missing something?

Why would I be glad to have these policies after I retire when I pretty much paid in what I would get out?

 

[Golfnut2112]

I would not do anything with the policy until you contact State Farm and get a inforce illustration.

 

[WinoBlues]

Contrary opinion. _if_ I decided that I should keep a small permanent policy it would not be these small non part plans. At <age 30 seems he could do better with the $600 premium and approx $800. Cash value.

And yes get an inforce first.

 

[rousemark]

Thanks for everyone's input. Here is the part I don't understand. If I kept paying these premiums until the age of 70, I would have paid about $35,000 for a policy that only has a death benefit of $50,000. I don't really feel like that's a good value. Am I missing something?

Why would I be glad to have these policies after I retire when I pretty much paid in what I would get out?

Yes, you are missing the fact that even though you have only paid a relatively small amount at this time, if you die today the plan will pay $50K. At 70, you still have 15K more than you paid in for the same premium you are paying now. If you try to by $15K WL at $70 for final expense purposes, it would cost you around $1200 per year. You are single now but do you plan to remain single all your life and never have any children dependent upon you? Will your parents enverr be dependent on you? The WL will never run out.. The term will. The WL will never go up.. the term will. Term is a great product for a short term need. When you allow for inflation simple funeral may well cost $50K when you are 70.

It is odd you used the age 70 becasue that is my age. Had I kept my original WL, I would have enough Reduced Paid Up insurance that I would not have to be paying the premiums I am now for the coverage I have.. Folks tell you that you will not need life insurance when you are old.. They are full of it. If you have been tremendously successful, you're going to need it for estate purposes. If you have been less than that and you have a wife or other family you want to make sure are not left in a precarious financial position, you are going to need it to protect them. I have never met anybody in my age group that was happy with the decision they made years ago to Buy Term and "Invest" the Difference.

If you want to use life insurance as a sort of investment, buy more WL but by Participating WL that pays dividends. Use the dividends to buy paid up additions. It will cost more than WL but it will increase in death benefit and build even more cash value on a tax deferred basis. Wish I had.

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I just ran a 20 year term product and assuming you could reenter at the end of each 20years (and that is a big assumption) , your would pay in about $4700 for 50K by age 70. At the end of the term, you have 0 cash value and 0 death benefit.

It looks like you are actually going to pay about $28700 by 70 and you have $50K death benefit. If you deduct the cost of thee insurance based on the term cost, you have paid $24K more for the WL..However, you are going to have cash value of a little over $28K which is a $4K gain. That is about a 1% compound interest rate which is abut what you can get in a long term CD today. However that other option is to quit paying your premiums at that time and when you die, your family gets approximately $45K.. That is a $17K gain..

 

[Tahoe Ray]

Yes, you are missing the fact that even though you have only paid a relatively small amount at this time, if you die today the plan will pay $50K. At 70, you still have 15K more than you paid in for the same premium you are paying now. If you try to by $15K WL at $70 for final expense purposes, it would cost you around $1200 per year. You are single now but do you plan to remain single all your life and never have any children dependent upon you? Will your parents enverr be dependent on you? The WL will never run out.. The term will. The WL will never go up.. the term will. Term is a great product for a short term need. When you allow for inflation simple funeral may well cost $50K when you are 70.

It is odd you used the age 70 becasue that is my age. Had I kept my original WL, I would have enough Reduced Paid Up insurance that I would not have to be paying the premiums I am now for the coverage I have.. Folks tell you that you will not need life insurance when you are old.. They are full of it. If you have been tremendously successful, you're going to need it for estate purposes. If you have been less than that and you have a wife or other family you want to make sure are not left in a precarious financial position, you are going to need it to protect them. I have never met anybody in my age group that was happy with the decision they made years ago to Buy Term and "Invest" the Difference.

If you want to use life insurance as a sort of investment, buy more WL but by Participating WL that pays dividends. Use the dividends to buy paid up additions. It will cost more than WL but it will increase in death benefit and build even more cash value on a tax deferred basis. Wish I had.

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I just ran a 20 year term product and assuming you could reenter at the end of each 20years (and that is a big assumption) , your would pay in about $4700 for 50K by age 70. At the end of the term, you have 0 cash value and 0 death benefit.

It looks like you are actually going to pay about $28700 by 70 and you have $50K death benefit. If you deduct the cost of thee insurance based on the term cost, you have paid $24K more for the WL..

Which is a terrible ROI....he would be better off buying term.

What's 50k going to be worth in 50 years? 10k in today's dollars?

Buy convertible term...if you need it, you can make it permanent. If not, you can drop it.

Or better yet, get a Protective policy with a decreasing DB after the level period as opposed to a reentry option.

He'll need to be worth 11m+ indexed for inflation for this to be an estate issue.

Just work harder if you're worried about paying for your funeral at 70.

 

[62doddst]

My humble opinion is you should keep both WL policies. At age 27 the premiums are low and will never be lower than when you purchased them 5-6 years ago. Heads-up! You are going to die... I hope it is later and not sooner! These policies are permanent insurance that will never run out, they will pay a death benefit. The premium will ever go up. State Farm is a mutual company which means they pay an annual dividend. This dividend is not guaranteed and is declared annually and shown on your annual statements you receive. SF has never not paid a dividend. Only the cash value is shown in your contract because it is guaranteed as is the DB and premium. The policy death benefits will be considerably higher at age 70 and after if you let the dividend accumulate or you have paid-up additions. You can also use the dividend to offset your premium at about the 20 year point, or so. You can use the dividend to offset part of the premiums now. Do not buy the term now, you do not need it until you need it. Keep the SF WL policies, fund your 401K to the match, if you have one. Start a Roth IRA and fund it to the max with low cost MFs and/or ETFs. You will be on a good road and I will not charge you for this advice!