Odd question re: whole life insurance

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FlamingoTime
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Odd question re: whole life insurance

Post by FlamingoTime » Wed Dec 05, 2018 7:32 am

My DH has been paying a monthly State Farm whole life (enough for burial) premium on his two children for over 25 years. He was sold this when they were infants. The children are now late 20's and early 30's. The children are probably not even aware that there is a policy or have forgotten. He is going to tell them that he will not be paying the premium any longer and the cash value is theirs. He wanted to tell them when he sees them for Christmas next month.

When he called the agent, she would not disclose how much the cash value was on the policies. She said that she can only deal with the children. The last time he checked a few years ago, he was told the cash out value was probably just under a thousand dollars each. Seemed to be no problem telling him then what the cash value was.

It is not a big deal, but we are just wondering if this is the law or the norm? It just seems that since he's been paying for the premium all these years, they could at least tell him what the cash value of it is. He understands that the cash goes to the children and wants to surprise them and be able to tell them what they will get.

Anyone familiar with this type of scenario?

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dwickenh
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Re: Odd question re: whole life insurance

Post by dwickenh » Wed Dec 05, 2018 7:36 am

I believe that once the minor children are of legal age, disclosure to parents/guardians is a breach of the disclosure clause in the policy. It doesn't matter who is paying the premium, it matters who is listed as the insured and their age. A prior balance given to the parent was likely a mistake.
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Gill
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Re: Odd question re: whole life insurance

Post by Gill » Wed Dec 05, 2018 7:43 am

dwickenh wrote:
Wed Dec 05, 2018 7:36 am
I believe that once the minor children are of legal age, disclosure to parents/guardians is a breach of the disclosure clause in the policy. It doesn't matter who is paying the premium, it matters who is listed as the insured and their age. A prior balance given to the parent was likely a mistake.
The rights in the policy are determined by the owner of the policy, not the insured.
Gill

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dwickenh
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Re: Odd question re: whole life insurance

Post by dwickenh » Wed Dec 05, 2018 7:44 am

Gill wrote:
Wed Dec 05, 2018 7:43 am
dwickenh wrote:
Wed Dec 05, 2018 7:36 am
I believe that once the minor children are of legal age, disclosure to parents/guardians is a breach of the disclosure clause in the policy. It doesn't matter who is paying the premium, it matters who is listed as the insured and their age. A prior balance given to the parent was likely a mistake.
The rights in the policy are determined by the owner of the policy, not the insured.
Gill
I stand corrected, thanks Gill
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

Jack FFR1846
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Re: Odd question re: whole life insurance

Post by Jack FFR1846 » Wed Dec 05, 2018 8:56 am

I am familiar with one of the characteristics of this scenario because my wife and father in law are involved with something similar.

My father in law and late mother in law bought some kind of whole life/annuity/who knows policy for my wife when she was a child. They paid who knows what for who knows how long. Now that my father in law is in his mid 80's, he brings a paper with the name of the policy to my wife and says it's something, he can't remember and probably worth $1k. My wife has way too much to do and is unable to prioritize this policy. I fully expect it will be completely forgotten forever and no money will ever be retrieved.

I tell this story for people who are thinking of getting some kind of "money in the future for your loved one" because there's more than a zero chance that you're simply donating to the insurance company.
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FlamingoTime
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Re: Odd question re: whole life insurance

Post by FlamingoTime » Wed Dec 05, 2018 12:03 pm

I'm guessing the ownership must have reverted to the kids at age 21. They will find out how much they are getting when they go to collect it. Great for them regardless!

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djpeteski
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Re: Odd question re: whole life insurance

Post by djpeteski » Wed Dec 05, 2018 12:09 pm

FlamingoTime wrote:
Wed Dec 05, 2018 12:03 pm
I'm guessing the ownership must have reverted to the kids at age 21. They will find out how much they are getting when they go to collect it. Great for them regardless!
This is what I would have answered. Your DH was the owner when the kids were minors, and at sometime (I would think 18), the took over ownership. This is probably company policy or state insurance law.

It serves the insurance company well, as while DH would cancel the policies, the agent has the opportunity to sell to two more people. I would not be surprised if she encouraged them to close these out, but to open two different whole life policies. First year commissions are where the bulk of their money is made.

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onthecusp
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Re: Odd question re: whole life insurance

Post by onthecusp » Wed Dec 05, 2018 3:38 pm

I'm a little surprised that any premiums are due at this point. I guess it depends on the policy and initial payment. My parents had a similar one on me, I started getting statements as an adult and it always showed a "dividend" that was a little larger than the premium. Once I found bogleheads I realized that it was just a complication and a bad investment. I cashed it for a few thousand, paid a large chunk of it in taxes and put the remainder in our emergency fund. If I were the kids receiving them now I would do the same but immediately. Buy separate term insurance if life insurance is needed at this point in their life.

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