Universal Life Insurance Keep or Cash Out

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tj
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Universal Life Insurance Keep or Cash Out

Post by tj »

Evidently my parents bought a $50,000 universal policy on me when I was born in 1985. My dad said that It has a cash value of $8,000 and they have paid $7,000 in premiums. It has a guaranteed interest rate of 4.5%. I think he said he's paid $200/year in premiums and the premiums do not change, but my understanding for universal policies, was that the cost of insurance increases as you age.

It seems this was purchased when DEFRA was what was regulating taxability of life insurance policies. This is what I could find about DEFRA:
Congress Act 2: The Deficit Reduction Act (DEFRA) of 1984

The Deficit Reduction Act (DEFRA) of 1984 coordinated with language laid out in TEFRA from two years before to establish specific rules about what life insurance was and what life insurance was not.

More specifically, upon DEFRA's passage, we now had specific limitations on premium size relative to an outstanding death benefit that qualified or disqualified a life insurance contract as life insurance.

It's easiest to think of these limitations as tests in the sense that failing the tests means the premium amount is outside the allowable limit, and the limit is a function of the size of the death benefit.

There are actually two tests, the Cash Value Accumulation Test (CVAT) and the Guideline Premium Test (GPT).

The Cash Value Accumulation Test (CVAT)

The CVAT was established mostly to handle how whole life insurance policies qualified as life insurance. The test is rather straightforward in the sense that it merely tests the level of cash that can exist inside a life insurance policy relative to the outstanding death benefit.

So long as this line is not crossed, the policy in question passes the test and is a life insurance contract.

Guideline Premium Test (GPT)

The GPT was established mostly to handle how universal life insurance policies qualified as life insurance (though universal life insurance can qualify as life insurance using the CVAT as well).

The test has two specific parts.

Step One is an amount of premium that a policyholder is allowed to pay into the policy relative to the death benefit.

For example, if the policy has a $1 million death benefit and the calculated guideline premium is $20,000 each year, the policyholder can place no more than $20,000 into the policy in any given year.

However…there are some exceptions…

There's an allowance for both a one-time payment and an ongoing annual payment. If the policyholder chooses to make the one-time payment, that would be all the premium he/she would be allowed to pay towards the policy.

Step Two is a ratio of cash value to the outstanding death benefit that decreases as the insured gets older. This is sometimes referred to as the corridor and why GPT is sometimes known as the corridor test.

What Happens If You Fail the Test?

Failing the test to qualify as life insurance means that policy is no longer considered life insurance. Instead, U.S. Tax Law treats the contract as if it were a taxable account much like a general brokerage account or savings account.

Any gain in the policy becomes immediately taxable as ordinary income. The earnings in the policy each year are taxable in that year just like a standard savings account or CD.

Death benefit proceeds are only income tax-free to the beneficiary for the portion paid to the beneficiary that represents raw death benefit. Lastly, because the contract no longer qualifies as life insurance, the policyholder cannot choose to transfer the funds in the policy to another life insurance policy through a tax-favorable 1035 exchange.

These rules sought to severely diminish the use (some would say abuse) of life insurance solely as a tax shelter, and they did a pretty good job of minimizing this behavior. But these rules didn't entirely stop the practice, and Congress felt compelled to act one last time.

From what my dad relayed to me from the insurance agent, I could put in $1100 this year and $950 in future years, so it's not really going to make a huge difference in increasing the cash value, but it's a good interest rate "tax deferred", and I don't need this $$ any time soon. I'll probably have to get an illustration and understand how much of this is going to cost of insurance.

I wonder, though, if the guaranteed interest rate on this thing really is 4.5%, would it make sense to overfund a policy, accept that the contract is now a "taxable account" per DEFRA, and pay taxes on it, because you can't can't 4.5% anywhere else? I'm assuming that if you pay the tax as you go, you're not going to also get taxed on that portion when you inevitably surrender the policy.

Edit:

I found that most insurers do not allow extra premiums that violate DEFRA because of the admin costs of issuing 1099s etc, so that's probably not an option.
123
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Re: Universal Life Insurance Keep or Cash Out

Post by 123 »

Universal Life Insurance has a lot of "gotchas" and they vary by policy. The life insurance within the policy is usually annually renewable term insurance so the premium for the insurance component of the policy will increase every year. Typically the policies build some cash value, expecially if you overfund the policy, at least for awhile The problem is that with the fixed annual premium for an insurance cost that is increasing (the annually renewable term) the extra cost of that insurance will be normally be taken from the cash value of the policy. So if someone just pays the minimum premium (on some policies a large initial payment can cause the premium to "vanish", at least for awhile) eventually the increasing cost of annual renewable term insurance will eat up the cash value.

If you need life insurance it is normally recommended to have replacement coverage in effect before you cancel a policy. Some sort of fixed term insurance with level premiums is usually the best deal (typically 20 or 30 year term insurance with level premiums).
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

123 wrote: Mon Sep 14, 2020 9:53 pm Universal Life Insurance has a lot of "gotchas" and they vary by policy. The life insurance within the policy is usually annually renewable term insurance so the premium for the insurance component of the policy will increase every year. Typically the policies build some cash value, expecially if you overfund the policy, at least for awhile The problem is that with the fixed annual premium for an insurance cost that is increasing (the annually renewable term) the extra cost of that insurance will be normally be taken from the cash value of the policy. So if someone just pays the minimum premium (on some policies a large initial payment can cause the premium to "vanish", at least for awhile) eventually the increasing cost of annual renewable term insurance will eat up the cash value.

If you need life insurance it is normally recommended to have replacement coverage in effect before you cancel a policy. Some sort of fixed term insurance with level premiums is usually the best deal (typically 20 or 30 year term insurance with level premiums).
I have a 25 year $1,000,000 policy that expires when I turn age 59. It costs $600/yr.
stlutz
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Re: Universal Life Insurance Keep or Cash Out

Post by stlutz »

I have a similar policy acquired the same way. The interest rates on them are very good

Each year I just calculate my return (increase in what I could cash it out for minus premiums paid). When I stop liking the results I'll probably do a 1035 exchange.

Assuming the numbers on yours work out like mine is keep it--especially given the rates will be at 0 for a long time to come.
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

stlutz wrote: Mon Sep 14, 2020 10:59 pm I have a similar policy acquired the same way. The interest rates on them are very good

Each year I just calculate my return (increase in what I could cash it out for minus premiums paid). When I stop liking the results I'll probably do a 1035 exchange.

Assuming the numbers on yours work out like mine is keep it--especially given the rates will be at 0 for a long time to come.
Have you added any additional funds to it? Or do you just keep it and pay the premiums every year?

What do you think you would 1035 it into?
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Re: Universal Life Insurance Keep or Cash Out

Post by stlutz »

I'm considering adding additional funds this year but historically I've just paid the regular premium.

I would probably 1035 to a VA at Fidelity if I was to do it today.
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Re: Universal Life Insurance Keep or Cash Out

Post by Doctor Rhythm »

I asked a similar question a few years ago about our parentally-gifted universal life policy. We ended up just continuing to ignore its existence, since we never paid anything into it. We will probably cash out before the nominal cash value drops.
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Re: Universal Life Insurance Keep or Cash Out

Post by Stinky »

If you have a $1 million life insurance policy, then the $50k death benefit on this policy is incidental to your financial life.

If you have a $1 million life insurance policy, then the possibility of depositing less than $1,000 per into a "savings account", even one that pays you 4.5% per year, is incidental to your financial life.

If it were my policy, I would lapse it, collect the $8,000 surrender value, provide for the taxes on my roughly $1,000 "gain" on surrender, and go on my way. By doing so, I would simplify my financial life.
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »


If you have a $1 million life insurance policy, then the possibility of depositing less than $1,000 per into a "savings account", even one that pays you 4.5% per year, is incidental to your financial life
This is true, though i did open the Digital Credit Union account for the 6% on $1k, I opened the Service Credit Union account for the 5% on 500 and 3% on $3000. It required a little effort, but on an ongoing basis, it's automated, for some extra interest, which admittedly is probably inconsequential, but why not take the extra $$$.
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Re: Universal Life Insurance Keep or Cash Out

Post by RadAudit »

Before she retired to Italy, Jane Bryant Quinn had a chapter on life insurance in "How to Make Your Money Last." Interesting read. I got enough out of it (Probably incorrectly. My fault.) to see that the costs for life insurance and fees exceeded my premium for the next year. I figured that over time my cash value would decrease if that trend continued. I'm in the process of cashing out that policy.

PS: I guess the family will have to cover the burial costs. I hear a local funeral home has deal that for $250 and no questions, two men will come ... :wink:
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Re: Universal Life Insurance Keep or Cash Out

Post by afan »

tj wrote: Tue Sep 15, 2020 9:43 am

If you have a $1 million life insurance policy, then the possibility of depositing less than $1,000 per into a "savings account", even one that pays you 4.5% per year, is incidental to your financial life
This is true, though i did open the Digital Credit Union account for the 6% on $1k, I opened the Service Credit Union account for the 5% on 500 and 3% on $3000. It required a little effort, but on an ongoing basis, it's automated, for some extra interest, which admittedly is probably inconsequential, but why not take the extra $$$.
Then contact the insurance company and see how much money you can put in, either as a single premium or on an ongoing basis. Just remember to keep an eye on the cost of insurance. At some point it will get high enough that it eats away at your return. Because of the cost of insurance and any other expenses, this is not the same as depositing money in an account that pays 4.5%. some of your premium goes to cover costs and you only get 4.5% on the rest. The return will always be less than if you could put the money in an account that paid 4.5% on the total deposit.

Have the company send you an illustration assuming you pay whatever amounts you choose. You can see the point at which it becomes a losing proposition.
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Re: Universal Life Insurance Keep or Cash Out

Post by petulant »

Numbers say keep, complexity says don't. Maybe have parents transfer it to you and you max fund it until you need the money for something and break open the piggy bank at that time.
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

Here is some policy info:

Image

Image
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

stlutz wrote: Mon Sep 14, 2020 11:07 pm I'm considering adding additional funds this year but historically I've just paid the regular premium.

I would probably 1035 to a VA at Fidelity if I was to do it today.
Does your look similar to mine that is posted in comment above this?

It's interesting to me that the policy basically will never lapse (well, I guess it expires 95 years after date of purchase) as long as the ~$196 planned annual premium is made. Unless the "planned premium" can increase?
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Re: Universal Life Insurance Keep or Cash Out

Post by Stinky »

tj wrote: Tue Sep 15, 2020 8:07 pm It's interesting to me that the policy basically will never lapse (well, I guess it expires 95 years after date of purchase) as long as the ~$196 planned annual premium is made. Unless the "planned premium" can increase?
The illustration says that the policy will stay in force until 2080 if you pay your $196 planned premium.

Period.
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

Stinky wrote: Tue Sep 15, 2020 8:36 pm
tj wrote: Tue Sep 15, 2020 8:07 pm It's interesting to me that the policy basically will never lapse (well, I guess it expires 95 years after date of purchase) as long as the ~$196 planned annual premium is made. Unless the "planned premium" can increase?
The illustration says that the policy will stay in force until 2080 if you pay your $196 planned premium.

Period.
So, does that mean that in 2080 the projected cost of insurance would be $196 plus whatever is left in the cash value? It seems pretty confusing.

But it looks like the policy gained 3% after insurance costs from June 2019 to June 2020, so I probably will just keep it until the math doesn't make sense, or I have some use to spend the funds.
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Re: Universal Life Insurance Keep or Cash Out

Post by Stinky »

tj wrote: Tue Sep 15, 2020 11:31 pm
Stinky wrote: Tue Sep 15, 2020 8:36 pm
tj wrote: Tue Sep 15, 2020 8:07 pm It's interesting to me that the policy basically will never lapse (well, I guess it expires 95 years after date of purchase) as long as the ~$196 planned annual premium is made. Unless the "planned premium" can increase?
The illustration says that the policy will stay in force until 2080 if you pay your $196 planned premium.

Period.
So, does that mean that in 2080 the projected cost of insurance would be $196 plus whatever is left in the cash value? It seems pretty confusing.

But it looks like the policy gained 3% after insurance costs from June 2019 to June 2020, so I probably will just keep it until the math doesn't make sense, or I have some use to spend the funds.
At its core, a universal life policy like yours is pretty simple. It's like a "savings account" (the cash value) that accepts "deposits" (your premium payments), allows "withdrawals" (cost of insurance charges, basic and rider expenses), and earns "interest" (interest credited). So long as the cash value remains positive, the policy stays in force.

So, what that means is that in your case, the payment of $196 in annual premium in future years, plus the current cash value, plus the projected future interest on the cash value, is greater than the future cost of insurance and other charges. In other words, your policy will continue to have a positive cash value from now until 2080.

I'm not sure exactly what will happen in 2080. Your policy language will say exactly what happens; that is, whether you'll get a refund of cash value, the insurance will stay in force, or whatever. I just hope that you're alive in 2080 to figure that out. :D

Does that make sense to you?
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

Stinky wrote: Wed Sep 16, 2020 4:42 am
tj wrote: Tue Sep 15, 2020 11:31 pm
Stinky wrote: Tue Sep 15, 2020 8:36 pm
tj wrote: Tue Sep 15, 2020 8:07 pm It's interesting to me that the policy basically will never lapse (well, I guess it expires 95 years after date of purchase) as long as the ~$196 planned annual premium is made. Unless the "planned premium" can increase?
The illustration says that the policy will stay in force until 2080 if you pay your $196 planned premium.

Period.
So, does that mean that in 2080 the projected cost of insurance would be $196 plus whatever is left in the cash value? It seems pretty confusing.

But it looks like the policy gained 3% after insurance costs from June 2019 to June 2020, so I probably will just keep it until the math doesn't make sense, or I have some use to spend the funds.
At its core, a universal life policy like yours is pretty simple. It's like a "savings account" (the cash value) that accepts "deposits" (your premium payments), allows "withdrawals" (cost of insurance charges, basic and rider expenses), and earns "interest" (interest credited). So long as the cash value remains positive, the policy stays in force.

So, what that means is that in your case, the payment of $196 in annual premium in future years, plus the current cash value, plus the projected future interest on the cash value, is greater than the future cost of insurance and other charges. In other words, your policy will continue to have a positive cash value from now until 2080.

I'm not sure exactly what will happen in 2080. Your policy language will say exactly what happens; that is, whether you'll get a refund of cash value, the insurance will stay in force, or whatever. I just hope that you're alive in 2080 to figure that out. :D

Does that make sense to you?
Yes. So It sounds like the issue with universal policies lapsing that we always hear about are because people must have stopped paying the planned premium and they relied on "illustrated basis" to make decisions rather than the "guaranteed basis"?
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Re: Universal Life Insurance Keep or Cash Out

Post by Stinky »

tj wrote: Wed Sep 16, 2020 3:19 pm So It sounds like the issue with universal policies lapsing that we always hear about are because people must have stopped paying the planned premium and they relied on "illustrated basis" to make decisions rather than the "guaranteed basis"?
Yes. Your policy has a guaranteed rate of 4.50%, and the $196 annual premium fully funds the policy at the guaranteed rate.

The “issue” with universal life policies is that many older policies had their funding based on a much higher non guaranteed rate, like 8%. That minimized the amount of premiums that they paid. But when the insurance company reduced the credited rate to, say, 4%, the policy lapsed way earlier than planned. And the policyholders were very unhappy.
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Re: Universal Life Insurance Keep or Cash Out

Post by afan »

Or worse, took out policy loans based on those optimistic return projections. Then had to pay back the loans before the policy lapsed. If it lapsed then all the returns they got above total premiums paid became taxable.
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

So apparently ~$600 is the most I can add. So I'll do that. No reason not to.


I guess I can add more if I change the policy from "Option 1" to "Option 2", but that would increase the death benefit and presumably the cost of insurance so that doesn't sound very interesting.
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

Here are the illustrations just for reference for people who find themselves with one of these in the future. I don't see why i would ever cancel this thing because the $192.50 annual premium seems to grow the cash value by more than that every year. The first set of numbers are the guaranteed values and the second set is the non-guaranteed. I can't say I can figure out how the non-guaranteed values are being calculaed based on the definitions.

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Stinky
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Re: Universal Life Insurance Keep or Cash Out

Post by Stinky »

tj wrote: Sun Sep 27, 2020 11:55 am Here are the illustrations just for reference for people who find themselves with one of these in the future. I don't see why i would ever cancel this thing because the $192.50 annual premium seems to grow the cash value by more than that every year. The first set of numbers are the guaranteed values and the second set is the non-guaranteed. I can't say I can figure out how the non-guaranteed values are being calculaed based on the definitions.

Image
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Yes, your cash value is growing, but by somewhat less than the 4.50% guaranteed rate.

Look at the first two lines on your illustration. At age 36, your cash value is $9,077. You then immediately pay a $192.50 premium. One year later, your cash value is $9,562. So the growth in your cash value, after factoring in premiums, is ($9,562 - ($9,077 + $193)) = $292.
[/quote]Yes, your cash value is growing, but by somewhat less than the 4.50% guaranteed rate.

Look at the first two lines on your illustration. At age 36, your cash value is $9,077. You then immediately pay a $192.50 premium. One year later, your cash value is $9,562. So the growth in your cash value, after factoring in premiums, is ($9,562 - ($9,077 + $193)) = $292. And your "earned rate" on your beginning cash value plus premium is ($292 / ($9,077 + $193)) = 3.15%.

The "earned rate" is less than 4.50% because of several things mentioned on your policy illustration - primarily the $5 monthly policy fee and the 7.5% load on premiums paid.

That being said, 3.15% is still a decent rate of interest in today's marketplace.
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

Look at the first two lines on your illustration. At age 36, your cash value is $9,077. You then immediately pay a $192.50 premium. One year later, your cash value is $9,562. So the growth in your cash value, after factoring in premiums, is ($9,562 - ($9,077 + $193)) = $292. And your "earned rate" on your beginning cash value plus premium is ($292 / ($9,077 + $193)) = 3.15%.

The "earned rate" is less than 4.50% because of several things mentioned on your policy illustration - primarily the $5 monthly policy fee and the 7.5% load on premiums paid.

That being said, 3.15% is still a decent rate of interest in today's marketplace.
Yeah. My first screenshot was accidentally from the illustration with out overfunding the extra $600, so the image you quoted is slightly different. I noticed the big jump from age 65 to age 66 and that's because I was using two different illustrations.
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Re: Universal Life Insurance Keep or Cash Out

Post by Rex66 »

Also keep in mind that many old UL policies with 4% guarantees have seen escalating insurance costs beyond normal expected age increases. So if you do keep it, realize they can increase coi up to max in policy. Usually evaluate every year at policy anniversary date.
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

Rex66 wrote: Sun Sep 27, 2020 12:25 pm Also keep in mind that many old UL policies with 4% guarantees have seen escalating insurance costs beyond normal expected age increases. So if you do keep it, realize they can increase coi up to max in policy. Usually evaluate every year at policy anniversary date.
The illustration says that the guaranteed cash values assume for the the maximum allowable cost for insurance charges and insurance riders. So if they are charging less than the max allowed now, it seems like the growth in cash value could be better than what they are illustrating. Unless I'm missing something?
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Re: Universal Life Insurance Keep or Cash Out

Post by Rex66 »

I didn’t do the calculations on return but if you are using lowest interest rate and max coi, then yes that’s the “worst” assuming of course company doesn’t go under and state guarantee association doesn’t fix it(unlikely scenario).
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Re: Universal Life Insurance Keep or Cash Out

Post by Stinky »

tj wrote: Sun Sep 27, 2020 12:44 pm
Rex66 wrote: Sun Sep 27, 2020 12:25 pm Also keep in mind that many old UL policies with 4% guarantees have seen escalating insurance costs beyond normal expected age increases. So if you do keep it, realize they can increase coi up to max in policy. Usually evaluate every year at policy anniversary date.
The illustration says that the guaranteed cash values assume for the the maximum allowable cost for insurance charges and insurance riders. So if they are charging less than the max allowed now, it seems like the growth in cash value could be better than what they are illustrating. Unless I'm missing something?
Looking at the illustration posted above, the “guaranteed” and “current” cash values are almost exactly the same until the insured is age 55 or so. That means that the insurer is already charging “guaranteed” cost of insurance rates up to age 55.

After age 55, the guaranteed column starts to lag the current column, meaning that the insurer is charging less than guaranteed cost of insurance. The cumulative divergence becomes pretty wide by age 95.
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Re: Universal Life Insurance Keep or Cash Out

Post by Rex66 »

That’s by design likely. Very little risk to the insurance company during the early years and if there were too many shenanigans, customers would 1035. Later on customers are stuck, unable to qualify for switching. It’s known less than 20% of people keep a policy in force until death. This further ensures that, helps cutting costs by eliminate the possibility of paying death benefits. Lots of people won’t be able to pump more money into the policy in retirement.
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Re: Universal Life Insurance Keep or Cash Out

Post by Taylor Larimore »

tj:

I am reading a new book by Harry Sit titled "My Financial Toolbox." He writes:
"To see whether an existing policy is worth keeping you can pay $135 to have a policy evaluated by the Consumer Federation of America Life Insurance Rate of Return Service (evaluatelifeinsurance.org). The service is run by James Hunt, a retired life insurance actuary, who has reviewed thousands of policies since 1984 when he began the service."
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Re: Universal Life Insurance Keep or Cash Out

Post by basspond »

We only purchased one to pay off our mortgage, and only after we fully funded all of our retirement accounts and had term life insurance policies. Our asset allocation for most of our working years was over 90% equities so we figured this was one way to balance our finances. Yes it was expensive and we could have had better returns on other investments but it did give us peace of mind when we had a mortgage and came in handy when we cashed it out for living expenses after we retired. Our premiums in the last half of our policy were less then 1/2 of the gain of the cash value amount. We also received stock in the company for having a policy with them.
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Re: Universal Life Insurance Keep or Cash Out

Post by Jack FFR1846 »

The numbers for you look good because your parents paid for this since birth. I cashed a UL policy after reading the illustration, but the policy was taken out when I was older and I cashed it 27 years later in my late 50s because the cash value had already started dropping and insurance, which I didn't need high and increasing.

What I did was to compare what term insurance for me would cost. For me, I could pay less for term but a little and of course the premium would be locked in. My cash value would go to zero when I turned 70. You're in better shape because you had so many low premium years because you were an infant when it started.

You really could go either way, but this is the first policy I've seen where it is justifiable to keep it IF you need the insurance. If you don't, your tax on $8k paid to you will be on $1k ordinary income. So not bad at all.
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tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

You really could go either way, but this is the first policy I've seen where it is justifiable to keep it IF you need the insurance. If you don't, your tax on $8k paid to you will be on $1k ordinary income. So not bad at all.

My understanding is that the tax would be much less than that, because the premiums paid into the policy become your cost basis. What I don't know is if you would be subject to early withdrawal tax of 10% before age 59.5 similar to an IRA or an annuity.
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Re: Universal Life Insurance Keep or Cash Out

Post by Stinky »

tj wrote: Sun Sep 27, 2020 7:58 pm
You really could go either way, but this is the first policy I've seen where it is justifiable to keep it IF you need the insurance. If you don't, your tax on $8k paid to you will be on $1k ordinary income. So not bad at all.
My understanding is that the tax would be much less than that, because the premiums paid into the policy become your cost basis. What I don't know is if you would be subject to early withdrawal tax of 10% before age 59.5 similar to an IRA or an annuity.
There’s no 10% penalty tax on life insurance surrenders.
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Topic Author
tj
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Re: Universal Life Insurance Keep or Cash Out

Post by tj »

Stinky wrote: Sun Sep 27, 2020 8:00 pm
tj wrote: Sun Sep 27, 2020 7:58 pm
You really could go either way, but this is the first policy I've seen where it is justifiable to keep it IF you need the insurance. If you don't, your tax on $8k paid to you will be on $1k ordinary income. So not bad at all.
My understanding is that the tax would be much less than that, because the premiums paid into the policy become your cost basis. What I don't know is if you would be subject to early withdrawal tax of 10% before age 59.5 similar to an IRA or an annuity.
There’s no 10% penalty tax on life insurance surrenders.
That's good to know. The reasons to surrender the policy, I think, would be:

A.) Desire to spend the money

B.) The interest earned on the cash value is less than what can be earned somewhere else. This shouldn't happen because if bank accounts ever go back up to 4%, the interest rate on these legacy policies should increase where the growth in cash value less the cost of insurance is greater than what you could get on FDIC.

C.) Simplify holdings.

Until I desire one of those things, I'll just treat it as part of tax-deferred fixed income allocation.
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