dnoorlander
New Member
- 1
My wife and I have had a Variable Universal Life Insurance policy since the year 2000 & we're wondering if we should cancel it.
Here are the particulars: We put $100 per month into it. About $28.50 goes toward insurance (with a death benefit of $200,000), $5.50 is taken as a fee, & the rest is invested among four different funds. The current cash value is about $10,500, with a surrender value of about $9,750.
Our concerns are (1) it really hasn't grown much over the years; (2) I heard somewhere that if I were to die my dependents would not get the death benefit AND the cash value, just the death benefit (which I really hate); and (3) we're automatically losing over 5% each month with that fee. I think we might be able to do better just buying term insurance & saving/investing some other way. Plus we could really use the money right now to pay down student loan debt.
On the other hand, I worry (1) that by canceling the policy we lose that $750 difference between the cash value & the surrender value; and (2) receiving all that money might put us in a higher tax bracket & we'll take a big hit in taxes next April 15th.
Does it sound wise to cancel? Will we have to pay taxes on the full $9,750 or just the growth, which is actually pretty negligible? Will it put us (family of five w/three children) in a higher tax bracket (moving us from about 40,000 per year to 50,000)? Are there advantages/disadvantages to canceling the policy that I'm not seeing?
Any advice would be appreciated.
Here are the particulars: We put $100 per month into it. About $28.50 goes toward insurance (with a death benefit of $200,000), $5.50 is taken as a fee, & the rest is invested among four different funds. The current cash value is about $10,500, with a surrender value of about $9,750.
Our concerns are (1) it really hasn't grown much over the years; (2) I heard somewhere that if I were to die my dependents would not get the death benefit AND the cash value, just the death benefit (which I really hate); and (3) we're automatically losing over 5% each month with that fee. I think we might be able to do better just buying term insurance & saving/investing some other way. Plus we could really use the money right now to pay down student loan debt.
On the other hand, I worry (1) that by canceling the policy we lose that $750 difference between the cash value & the surrender value; and (2) receiving all that money might put us in a higher tax bracket & we'll take a big hit in taxes next April 15th.
Does it sound wise to cancel? Will we have to pay taxes on the full $9,750 or just the growth, which is actually pretty negligible? Will it put us (family of five w/three children) in a higher tax bracket (moving us from about 40,000 per year to 50,000)? Are there advantages/disadvantages to canceling the policy that I'm not seeing?
Any advice would be appreciated.
