Keep Life Insurance? Withdraw Dividends?

[Bdouvs]

Parents purchased a whole life policy on me when I was young and I've been paying the annual premium for a while now.

Currently 44 years old. Married, 2 young children. I can easily afford the premium.

Base Plan Death Benefit - $50,000
Policy Start Date - 12/31/1987
Total Death Benefit - $99,500
2024 Dividend (reinvested/purchased more benefit)- $335

Do I take the cash value ($24,300), invest in VTI and end the policy?

Do I withdraw the dividend value ($13,100), invest in VTI, pay the annual premium and the policy continues?

Do nothing, continue paying the annual premium.

Thank you in advance

[VanguardInvestor1972]

Noting the long-running antipathy of many on this board for anything Whole Life related for many sound reasons, I imagine you are bound to receive a bunch of "cancel immediately and invest in VTI" type responses!

But a serious threshold question might be: can you see any reason why you need -- or, better said, why your family might need you to hold -- $50,000 in more-or-less guaranteed life insurance coverage for the indefinite future?

[Bdouvs]

Noting the long-running antipathy of many on this board for anything Whole Life related for many sound reasons, I imagine you are bound to receive a bunch of "cancel immediately and invest in VTI" type responses!

But a serious threshold question might be: can you see any reason why you need -- or, better said, why your family might need you to hold -- $50,000 in more-or-less guaranteed life insurance coverage for the indefinite future?

I'm considering keeping it to pass down to my wife/kids to help in any way they choose. Annual premium is $397 so paying that for a current $100k payout seems like a good investment decision.

That being said, I saw that I can withdraw $13k in dividends and I figured those funds would be better put into VTI rather than sitting in the policy.

[Stinky]

Parents purchased a whole life policy on me when I was young and I've been paying the annual premium for a while now.

Currently 44 years old. Married, 2 young children. I can easily afford the premium.

Base Plan Death Benefit - $50,000
Policy Start Date - 12/31/1987
Total Death Benefit - $99,500
2024 Dividend (reinvested/purchased more benefit)- $335

Do I take the cash value ($24,300), invest in VTI and end the policy?

Do I withdraw the dividend value ($13,100), invest in VTI, pay the annual premium and the policy continues?

Do nothing, continue paying the annual premium.

Thank you in advance

You don't give us any information about your insurance needs, and whether you have more life insurance than just this policy with about $100,000 death benefit.

You likely need to have some amount of life insurance, given that you have two young children who will be depending on you for financial support for many years to come. If this whole life policy is all the life insurance that you have, you're probably under-insured.

Going to my favorite site (zander.com) for quotes - presuming that you're a 44 year old male, in the "preferred" (that is, second best) underwriting category, and you are a non-smoker, you could purchase $500,000 of 20-year term life insurance for under $600 per year. How does that compare in both coverage and premium with what you have now?

You could also look at term4sale.com for quotes on term life insurance.

As to whether to keep this policy or not - you can decide if it's worthwhile to keep as a "fixed income" investment for your $24,300 cash value if you'll get an "inforce illustration" and post some information about the projected growth of the cash value, and the annual premium that you're paying. But just realize that the face amount of $99,500 is likely too small an amount of life insurance for you, if that's all the life insurance that you have.

[Chardo]

Once you get that inforce illustration, you will see that a long-existing policy like that has a very attractive rate of return going forward. The annual dividend, cash value increase, and death benefit increase every year are quite high compared to the premium, unlike the earlier years. Whether you need the death benefit or not, that policy right now is a good deal for you. The inforce illustration will show you.

[eigenperson]

I'm considering keeping it to pass down to my wife/kids to help in any way they choose. Annual premium is $397 so paying that for a current $100k payout seems like a good investment decision.

The deal is not $400/year for a $100K+ payout. The deal is actually $24,300 up front, plus $400/year, for a $100K+ payout. A very different story.

That said, don't make a decision until you get an in-force illustration from the company. Evaluate based on that.

Even if you end up keeping this one, don't buy life insurance policies on your own kids.

[ScubaHogg]

The deal is not $400/year for a $100K+ payout. The deal is actually $24,300 up front, plus $400/year, for a $100K+ payout. A very different story.

This is a good point. In a MMF that $24,300 would be spitting out around $1000 a year in interest.

So in terms of opportunity cost, the OP is paying ~$1400/year for $100K of coverage

[Bdouvs]

Thanks everyone

I currently have 15 years left on $750k term. Outside of that it's the investments (401k, Roth, IRA, Taxable) accounts which are over $2m. No other life insurance and I am not taking policies out on my children and no intent to purchase a new whole life policy.

I'm going to keep the policy but does anyone know what happens if I withdraw the $13k in dividends? Does that lower the death benefit by a similar amount, $13k? Or would it reduce it by $45k which is the additional benefit purchase by the $13k in dividends?

Thanks again

[Stinky]

Thanks everyone

I currently have 15 years left on $750k term. Outside of that it's the investments (401k, Roth, IRA, Taxable) accounts which are over $2m. No other life insurance and I am not taking policies out on my children and no intent to purchase a new whole life policy.

I'm going to keep the policy but does anyone know what happens if I withdraw the $13k in dividends? Does that lower the death benefit by a similar amount, $13k? Or would it reduce it by $45k which is the additional benefit purchase by the $13k in dividends?

Thanks again

If you withdraw all dividends, the death benefit will be reduced down to the original face amount.

[Chardo]

Thanks everyone

I currently have 15 years left on $750k term. Outside of that it's the investments (401k, Roth, IRA, Taxable) accounts which are over $2m. No other life insurance and I am not taking policies out on my children and no intent to purchase a new whole life policy.

I'm going to keep the policy but does anyone know what happens if I withdraw the $13k in dividends? Does that lower the death benefit by a similar amount, $13k? Or would it reduce it by $45k which is the additional benefit purchase by the $13k in dividends?

Thanks again

If you withdraw all dividends, the death benefit will be reduced down to the original face amount.

And future dividends will be smaller.