What are my options with whole life policy nearly paid up?

Submitted by Anonymous (not verified) on Tue, 12/23/2008 - 12:23

I have a small whole life policy that I took out many years ago. The policy will be paid up in 2013. I currently have a premium that is due.

What are my options (other than paying until 2013) and the pros and cons of each?
Thanks.

Posted: 23 Dec 2008 01:03 Post Subject:

Well, JustAskin...I'm JustTellin' there tain't no way of sayin' without more information.

What your JustAskin is so non-specific as to not have any way to answer.

What does small mean?

To me any death benefits at or under $100,000 is small.

AND are you sure it's Whole Life and not Universal Life?

Paid-up based on what? Guaranteed Values or Current Assumptions?

The "pros" of keeping your policy in-force will mean your beneficiary will receive the death benefit when you die. Is that still important to you? Once the need or desire for the death benefit evaporates there isn't much sense in paying the premium except for perhaps final expenses or estate liquidity.

Now I'm not being harsh....I'm JustSayin' what you're JustAskin' isn't relative to anything without specific policy information.

Merry Christmas

Posted: 23 Dec 2008 02:39 Post Subject:

The policy value is $10,000. I took it out in 1969 so I'm pretty sure it is whole life. A couple of years ago, I contacted the company and asked how long the premiums continue on this policy and they told me that it would be paid up (whatever that means) in 2013. I would assume that this policy has a cash value of nearly $10K since I've been paying on it for nearly 40 years.
I guess what I'm really asking is can a policy like this be cashed out before death?
Thanks for your help.

Posted: 23 Dec 2008 03:37 Post Subject:

I guess what I'm really asking is can a policy like this be cashed out before death?


Yes, and many times this may be to your advantage as most of the death benefit at this point in a 40 year old policy is nothing more than your cash anyway.

I would say if your cash value is $7,000 or more you may want to take a hard look at some financial alternatives since it appears to me the need for the $10,000 death benefit has evaporated over the years and at this point your premiums are only going to pay for the difference between your cash in the policy and the policy's death benefit and of course to fund the cash value.

I'm NOT saying that's bad, just stating facts.

Just be aware that if you cash out the policy and realize a gain you will owe Federal Income Taxes on the interest earnings. You could 1035 exchange the life insurance for an annuity and avoid taxes on the gain.

The down side is that the beneficiary now pays tax on the deferred growth of the annuity where the death benefit paid under the life insurance policy would be received tax free to the beneficiary.

But, your cash may grow better in an annuity than in the life insurance policy since there wouldn't be any deduction for life insurance in a Fixed Annuity.

If you post the specific dollar amount of your cash surrender value I'll run the numbers with a 5 year guaranteed product that pays a 10% premuim bonus, just for fun, to see how the numbers compare.

Merry Christmas!

Posted: 24 Dec 2008 03:38 Post Subject: insurance

GARY.............different things I've read on Term LIFE and Whole LIFE are confusing to me. The OP said he/she is paying on a WHOLE Life policy. I thought that means exactly what it says : TERM ( paying on it for a certain amount of time) WHOLE ( paying on it for 'life'). How can a WHOLE Life policy be paid within a certain 'term'? ( Hope I'm expalining myself here). Also.......can you please claify the difference about Whole Life and Term Life VS. Universal Life? ALL of this can get confusing. Thanks.

Posted: 24 Dec 2008 11:34 Post Subject:

To my understanding, paid up is an option where the policyholder has the choice to discontinue the premium payment but enjoy the reduced sum assured till the policy matures. Paid up option is possible if the policy has accumulated cash value.

Before we can offer any suggestion, may we know what was your age when you got this policy?

Posted: 26 Dec 2008 01:53 Post Subject:

sdchargersfan wrote:

Also.......can you please claify the difference about Whole Life and Term Life VS. Universal Life? ALL of this can get confusing.


SD' there are only two forms of life insurance,.... Term or Cash Value.

There is nothing else.

Everything else is just a financing mechanism and marketing.

The purpose of cash value life insurance is to keep your premiums level and have your own cash offset the fact you're getting older each and every year.

Since YOUR cash in the policy becomes part of the death benefit, in my example above, a $10,000 death benefit on a 40 year old policy with $7,000 cash value means the insurance company is at "risk" to pay out $3,000 when the person dies. The balance of the death benefit paid is nothing more than the person's own money being paid to the beneficiary.

Term insurance doesn't have the cash value offset to your own mortality. They simply charge you more money as you get older.

Many times with life insurance the DISTINCTIONS ARE WITHOUT A DIFFERENCE. Leading to confusion.

Would you prefer to drive to work today in the cheap car or would you rather use the expensive automobile?

Do you see what I'm taking about?

The issue is transportation to work.

Both the cheap car or the expensive automoblie will get you there.

Posted: 01 Jan 2009 02:09 Post Subject: Reply to JustAskin

JustAskin,

If you want the cash you can cancel your insurance and take the cash. If you receive more than you paid into it, you will pay income taxes on the gains. However, I doubt you have you have much of a gain if any, so I wouldn't worry about that.

I'm guessing you probably aren't interested in the 10k death benefit anymore and you would just rather take the cash. Is that right?

If you are interested in using the cash value to purchase another policy with a higher guaranteed death benefit... let me know and I'll run some numbers for you. You can take the cash value and buy a paid up policy right now and never have to pay another penny again.

Posted: 26 Jan 2009 03:04 Post Subject:

I finally got the requested info. from AIG. Hopefully this will fill in all the missing blanks.
- I took out the policy at age 20 and am now 61
- The Net Cash Value is $5,960

Since the cash value is only 60% of the policy face value and I don't need either the insurance or the money right now, I assume it would be wise to keep the policy.
The annual premium is $146 and there are 5 years left before it is paid up. The interest rate is 5.5%. Would I be better off using the cash value to pay the remaining premiums or pay them out of pocket.
Thanks.

Posted: 26 Jan 2009 03:22 Post Subject:

What are your goals? Do you want to just keep $10k of insurance? Do you want more ($50k? $100k? $250k?)....most people's circumstances have changed greatly over the course of 40 years and it is impossible to say what you should do without knowing what your goals are. If you are looking to increase your insurance, you should do a 1035 exchange (tax-free) to a new policy to lower your annual premiums. If you wait another 4 years to do this, your premiums would be substantially higher due to your age.

Posted: 06 Apr 2009 12:31 Post Subject:

"GARY.............different things I've read on Term LIFE and Whole LIFE are confusing to me. The OP said he/she is paying on a WHOLE Life policy. I thought that means exactly what it says : TERM ( paying on it for a certain amount of time) WHOLE ( paying on it for 'life'). How can a WHOLE Life policy be paid within a certain 'term'? ( Hope I'm expalining myself here). Also.......can you please claify the difference about Whole Life and Term Life VS. Universal Life? ALL of this can get confusing. Thanks."

You're close. Term and Whole doesn't refer to the premium payment period. It refers to how long the death benefit stays in force. Term insurance has a death benefit that is temporary. Whole Life insurance has a death benefit that is permanent. Some whole life policies have premiums that need to be paid forever. Other policies can be completely paid up after just one premium.

Posted: 06 Apr 2009 12:37 Post Subject:

"SD' there are only two forms of life insurance,.... Term or Cash Value.

There is nothing else.

Everything else is just a financing mechanism and marketing.

The purpose of cash value life insurance is to keep your premiums level and have your own cash offset the fact you're getting older each and every year.

Since YOUR cash in the policy becomes part of the death benefit, in my example above, a $10,000 death benefit on a 40 year old policy with $7,000 cash value means the insurance company is at "risk" to pay out $3,000 when the person dies. The balance of the death benefit paid is nothing more than the person's own money being paid to the beneficiary.

Term insurance doesn't have the cash value offset to your own mortality. They simply charge you more money as you get older."

Everything in your description of "cash value life insurance" is description of Universal Life and not Whole Life. And, of course, with universal life, you are getting charged more money as you get older. You may not have to pay more out of pocket, buy you are being charged more every year.

Posted: 06 Apr 2009 08:28 Post Subject: hi

you can withdraw some amount from your policy if its whole life you cannot withdraw from term life insurance policy

Posted: 15 Apr 2009 12:03 Post Subject:

The policy value is $10,000 around exactly . I took it out in 1983 so I'm sure about it thats it is whole life. around 4 years ago, I contacted the company and asked how long the premiums continue on this policy and they told me that it would be paid up (whatever that means) in 2013. I would assume that this policy has a cash value of nearly $10K since I've been paying on it for nearly 40 years.
I guess what I'm really asking is can a policy like this be cashed out before death?
Thanks for your help.

Posted: 15 Apr 2009 03:21 Post Subject:

A whole life contract can be "cashed out" at any time for the policy's surrender value. It cannot, however, be cashed out for an amount equal to the death benefit - unless, of course the policy has matured.

Posted: 04 Jul 2009 07:33 Post Subject:

The surrender value is $8.52

Posted: 16 Feb 2010 03:04 Post Subject: Flexible Premium Adjustable Life

I have (2) $50,000 policies which the following charges increase with time: Expense Charge, Cost of Insurance, and of course the Premium Charge. These policies will become unaffordable to me in future years. I don't have much cash value built up as I had to withdraw money through the years. The policies are with Western & Southern. Should I start shopping for a term policy or try and hang on to what I have?

Posted: 16 Feb 2010 03:42 Post Subject:

How old are you and how is your health? If all you want is a guaranteed death benefit for life, you may be able to do a 1035 exchange to transfer the cash value to a guaranteed universal life policy and "buy down" the premium. Do you want the policy guaranteed for life, or do you only want it guaranteed for a specific period of time?

Posted: 16 Feb 2010 09:15 Post Subject:

For educational purposes, JES 1958 has current assumption universal life insurance policies. Dgoldenz has brought up a good point, that it may be possible to 1035 (transfer the money without paying taxes on gains to another policy) the money to a secondary guaranteed universal life insurance policy, which is permanent no cash value (even if it says there is ;)) life insurance. Term to age 100 or infinity, or whatever you want to call it, so long as you pay the premium.

To also address the question, are you currently losing money in the contract due to charges? Or is the account value still rising as you pay premiums. How long have you had them?

Posted: 29 Mar 2010 11:08 Post Subject: whole life matured

my whole life policy has matured. All premiums are paid. Should I take the cash value now? I will be 90 in 6 weeks and I'm healthy. Thanks.

Posted: 09 Mar 2011 03:10 Post Subject: paid up life ins. policy

My term life ins. policy has been paid up for awhile. I have other ins. policies to cover my expenses when I die. I need the cash value of this policy now. Do I have to pay Fed. Income Tax and State Tax on it when I file next year?

Posted: 18 Mar 2011 05:19 Post Subject:

My term life ins. policy has been paid up for awhile. I have other ins. policies to cover my expenses when I die. I need the cash value of this policy now.



Generally, term life insurance = no cash value. So your question has little/no relevance. Return of premium term policies do have a cash accumulation, but that would never exceed the cost basis (premiums paid), so terminating a ROP term policy early would not incur an income tax liability in most cases.

Posted: 05 Apr 2011 12:37 Post Subject:

Whatever you do don't lapse that policy. I would just make the payments and then have the policy pay for itself thought the dividends.

Posted: 05 Apr 2011 05:40 Post Subject:

whatever you do dont lapse that policy. I would just make the payments and then have the policy pay for itself thought the dividends.



Please give an example of a DIVIDEND-PAYING term life policy -- I've never seen one since I was first licensed in 1980.

The OP in the most recent thread says his is a "paid up" term policy. I'm not sure he's correct in that statement, either.

Posted: 16 Dec 2011 09:07 Post Subject: Loan

I converted my term life policy in to whole life policy with a cash value of $14,000, can I make a loan against the $14,000?

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