Whole Life Policy - Buh Bye?

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invest4
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Whole Life Policy - Buh Bye?

Post by invest4 » Mon Feb 10, 2020 5:16 pm

I know the general consensus here on the boards is that whole life policies are not useful (being charitable) and quite a few suggest it should be...criminal.

We are thinking of ridding ourselves of my wife's whole policy. Historically, the premium was so low, we just didn't bother too much. However, we now take a sincere look, but I wanted to check here first to make sure it's the prudent thing to do.

Policy Face Amount: 10,000
Policy Benefit: 16,700
Accidental Death Benefit Rider: 20000
Annual Premium: 125

Cash Value: 7,600
Cash value increase from previous year: 130

Maximum Dividend Available: 3500
Anniversary Dividend Amount: 92
Paid Up Additions Cash Value: 3500
Dividend Option: Paid Up Additions



I don't quite understand the dividend bit relative to the cash value, but the online account has an option to withdraw it (dividend).

Many thanks!

fyre4ce
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Re: Whole Life Policy - Buh Bye?

Post by fyre4ce » Mon Feb 10, 2020 5:36 pm

What's the total amount you've paid in premiums?

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White Coat Investor
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Re: Whole Life Policy - Buh Bye?

Post by White Coat Investor » Mon Feb 10, 2020 5:47 pm

Sounds like a policy bought by a parent 20-30 years ago. Normally, after 20-30 years it's wise to keep a policy. But in this case, it's likely a crummy policy whose returns are being eaten up by the insurance and administrative costs. At $7600...I'd take the surrender value and walk away.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Steelersfan
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Re: Whole Life Policy - Buh Bye?

Post by Steelersfan » Mon Feb 10, 2020 6:11 pm

That's a bad policy. I've got one I've decided to keep that's even older. I pay twice what you do a year, but my death benefit is 10 times as much and increases $3,000 a year. I'll keep paying mine and my heirs can enjoy the proceeds.

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invest4
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Re: Whole Life Policy - Buh Bye?

Post by invest4 » Mon Feb 10, 2020 6:23 pm

fyre4ce wrote:
Mon Feb 10, 2020 5:36 pm
What's the total amount you've paid in premiums?
White Coat Investor wrote:
Mon Feb 10, 2020 5:47 pm
Sounds like a policy bought by a parent 20-30 years ago. Normally, after 20-30 years it's wise to keep a policy. But in this case, it's likely a crummy policy whose returns are being eaten up by the insurance and administrative costs. At $7600...I'd take the surrender value and walk away.
Steelersfan wrote:
Mon Feb 10, 2020 6:11 pm
That's a bad policy. I've got one I've decided to keep that's even older. I pay twice what you do a year, but my death benefit is 10 times as much and increases $3,000 a year. I'll keep paying mine and my heirs can enjoy the proceeds.
In force since 1978.

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BolderBoy
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Re: Whole Life Policy - Buh Bye?

Post by BolderBoy » Mon Feb 10, 2020 6:35 pm

White Coat Investor wrote:
Mon Feb 10, 2020 5:47 pm
Sounds like a policy bought by a parent 20-30 years ago. Normally, after 20-30 years it's wise to keep a policy. But in this case, it's likely a crummy policy whose returns are being eaten up by the insurance and administrative costs. At $7600...I'd take the surrender value and walk away.
I agree with this.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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sergeant
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Re: Whole Life Policy - Buh Bye?

Post by sergeant » Mon Feb 10, 2020 6:48 pm

Buh-Bye! I would dump it just for simplification. It's too small to bother keeping. Take her parents out for dinner with some of the proceeds.
Lincoln 3 EOW! AA 40/60.

fyre4ce
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Re: Whole Life Policy - Buh Bye?

Post by fyre4ce » Mon Feb 10, 2020 7:23 pm

I calculate your basis to be about 43 years x $125/year = $5,375. So you've got a gain of about $2,200. I agree with other posters that you should just cash it out. It's a small nuisance policy; if it were bigger and paying a decent dividend rate it might be worth holding onto. But it's not going to make any meaningful difference to you to keep it.

By the way, I calculate your rate of return to be about 1.7% nominal, after 43 years. If you'd instead invested the $125/year into the S&P 500 over the same period (11.93% CAGR), you'd have $118,000 today. :(

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Stinky
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Re: Whole Life Policy - Buh Bye?

Post by Stinky » Mon Feb 10, 2020 7:45 pm

sergeant wrote:
Mon Feb 10, 2020 6:48 pm
Buh-Bye! I would dump it just for simplification. It's too small to bother keeping. Take her parents out for dinner with some of the proceeds.
+1

Let it go!
It's a GREAT day to be alive - Travis Tritt

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invest4
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Re: Whole Life Policy - Buh Bye?

Post by invest4 » Thu Feb 13, 2020 7:21 pm

Thanks all...so long policy.

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Stinky
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Re: Whole Life Policy - Buh Bye?

Post by Stinky » Thu Feb 13, 2020 7:27 pm

invest4 wrote:
Thu Feb 13, 2020 7:21 pm
Thanks all...so long policy.
Winner, winner, chicken dinner!

(Take her parents out for dinner, too)
It's a GREAT day to be alive - Travis Tritt

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