Life insurance question

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Sissybugs
Posts: 9
Joined: Mon Feb 04, 2019 12:44 am

Life insurance question

Post by Sissybugs » Tue May 14, 2019 4:18 pm

Hello all.
When we we're younger, we purchased a life Insurance on my husband. Bad choice as we found out a few years ago. We thot it was 'forever' insurance once it was paid, but we were wrong!
It was purchased on 4/08/94 from Mutual of Omaha.

Death benefit as of 4/08/19 is $200,000.
Cash accumulation value 4/08/19 is $49,042.
We were shocked (and stupid) to learn the policy would totally end at age 70. Therefore, in order to keep the policy until age 80, we are paying annual premium of $5,820. At age 80, end of policy.

Husband thinks we should take the money now. He is 73 yrs and I am 63 yrs.

Any suggestions please and thank u🙂

User avatar
Stinky
Posts: 879
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Life insurance question

Post by Stinky » Tue May 14, 2019 4:56 pm

Sissybugs wrote: ↑
Tue May 14, 2019 4:18 pm
Hello all.
When we we're younger, we purchased a life Insurance on my husband. Bad choice as we found out a few years ago. We thot it was 'forever' insurance once it was paid, but we were wrong!
It was purchased on 4/08/94 from Mutual of Omaha.

Death benefit as of 4/08/19 is $200,000.
Cash accumulation value 4/08/19 is $49,042.
We were shocked (and stupid) to learn the policy would totally end at age 70. Therefore, in order to keep the policy until age 80, we are paying annual premium of $5,820. At age 80, end of policy.

Husband thinks we should take the money now. He is 73 yrs and I am 63 yrs.

Any suggestions please and thank u🙂
I agree with your husband. I’d surrender the policy now, get the $49k surrender value, and invest it per your asset allocation plan. There might be minor taxable income on surrender, but it should be small (if any).

Cash value life insurance is rarely a good purchase, and you’ve said nothing that makes your situation an exception to the rule.

A big upside is that you’ll save the almost $6k premium, which likely will go up every year that you keep the policy.
It's a GREAT day to be alive - Travis Tritt

megabad
Posts: 1634
Joined: Fri Jun 01, 2018 4:00 pm

Re: Life insurance question

Post by megabad » Tue May 14, 2019 9:34 pm

Sissybugs wrote: ↑
Tue May 14, 2019 4:18 pm
Hello all.
When we we're younger, we purchased a life Insurance on my husband. Bad choice as we found out a few years ago. We thot it was 'forever' insurance once it was paid, but we were wrong!
It was purchased on 4/08/94 from Mutual of Omaha.

Death benefit as of 4/08/19 is $200,000.
Cash accumulation value 4/08/19 is $49,042.
We were shocked (and stupid) to learn the policy would totally end at age 70. Therefore, in order to keep the policy until age 80, we are paying annual premium of $5,820. At age 80, end of policy.

Husband thinks we should take the money now. He is 73 yrs and I am 63 yrs.

Any suggestions please and thank u🙂
Respectfully, how is husband's health? Does he have good genes? If you anticipate health issues near term, i would definitely keep the policy. If you expect him to live until 95, I would probably dump it. Anything in between you would have to closely compare your "return" on additional premiums and the death benefit compared to the cash value and predicted investment returns (the alternative).

Topic Author
Sissybugs
Posts: 9
Joined: Mon Feb 04, 2019 12:44 am

Re: Life insurance question

Post by Sissybugs » Tue May 14, 2019 9:42 pm

Even though husband has severe rheumatoid arthritis and some other problems, he has longevity in his genes.

tomd37
Posts: 2961
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Life insurance question

Post by tomd37 » Tue May 14, 2019 10:02 pm

Sissybugs - Your post hits home with me. I'm in my early 80's and just discovered how much I did not understand (and it's strictly my fault) when I converted to a universal life policy 25 years ago. Sure the premiums seemed cheap and reasonable, but upon reaching 80 I found my cash value had decreased to zero and I need to start paying hundreds of dollars per month more just to keep the policy in effect.

I am in very good health for my age and figure I could quite easily end up paying more in premiums than the policy benefits if I live to my later 80s. Fortunately our financial position is such that I really no longer feel the need for this policy and I am about to cancel it before it gets worse financially. Many, many years ago I purchased whole life paid up at age 55 and that policy benefit will more than suffice for life insurance coverage.

Word to the wise reading this post. Fully understand what type of insurance "is being sold to you" before going into a contract. In many cases you are not buying a policy, but rather being sold one. :annoyed
Tom D.

sport
Posts: 8009
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Life insurance question

Post by sport » Tue May 14, 2019 10:12 pm

Here is another way to look at it. If you have a policy that will pay 200K at death, and a 50K cash value, then what you really have is 150K insurance. You can get the 50K, or you can wait for the 200K, but you cannot get both. So, as the cash value grows, the amount of insurance coverage actually decreases, even though it nominally says it pays 200K. Since the amount of insurance is decreasing, and the premium remains the same, the insurance is becoming more expensive as time passes.

Post Reply