Should I Cancel My Whole Life Policy?

Yea.....if he lives to age 100 hahahahahaha.......

What does living to 100 have to do with anything? The figures I provided are based on his living to age 70.... I think he might have a fair chance of making that.. if he doesn't then the DB will pay much more than he ever paid in.
 
What does living to 100 have to do with anything? The figures I provided are based on his living to age 70.... I think he might have a fair chance of making that.. if he doesn't then the DB will pay much more than he ever paid in.


so a 49 year investment that yields a $7875 profit......hummmmm
 
so a 49 year investment that yields a $7875 profit......hummmmm

Actually the yield would be closer to $10K when you figure the cost of the term, if he bought term and invested the difference. And, yes it is a 49 year investment but it is a very small investment. After all, if I only put in $1.00 a year for 49 years, I don't think it would even come close to $7875..
 
$457.36 as of July 2nd. for the policy he showed.

Thank you I see it now.

The pluses are PUAs and WP, GPO riders. Other than that it is a yawner for a guy that most likely will not die for 50 years. Sure both policies will total around $80,000 in todays dollars in face and if he becomes disabled or uninsurable the riders become important.

No way I could recommend anything to him as I do not know anything about him.

Excuse my ignorance but I'm a P&C guy.... what is PUA, WP, and GPO... :D.

At face value, I agree that it looks like a policy with only basic benefits. $55 / month is not a lot but in my situation I haven't started a retirement fund yet. I was thinking that since I'm already used to this money coming out of my account every month, I could use it to start a solo 401k or start a SEP IRA for my company. Obviously I would add more money to the mix but right now I don't see the immediate benefit of keeping this policy. Maybe I'm being short sighted but wouldn't investing the $660 / year be better than paying for such a small life insurance policy?

What specific information would you need to know about me to help me make a decision?
 
What specific information would you need to know about me to help me make a decision?


If you have a woman......planning on getting married....plan on having kids.....how much you make each year....how much debt you have.......
 
You know I'm not sure. Maybe you can help me make sense of this:

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I don't understand the cash value and paid up insurance columns. My premium is like $299 / year but I assume "paid up insurance dollars" is the amount I've paid for the policy over the years but those numbers don't add up.

I also have no clue what "extended term ins yrs days" is haha...

A little late to the party on this tread, but the column I especially go over when I deliver policies is the Extended Term column. If you stop paying on this plan after 5 years it will carry itself for another 16 years and 144 days. Hold onto it for 15 years and it will still be in benefit for another 32+ years. That's 32 years of free life insurance.

In another 10 years you can put the matching death benefits (50K) in a trust (or bank) and drop the policies. This will double the original benefit for your (possible) future family.

If after 10 more years you don't have the extra 50K to save away then you have the option of continuing to pay on these plans and not have to rely on term, which won't be there if you live too long.
 
A little late to the party on this tread, but the column I especially go over when I deliver policies is the Extended Term column. If you stop paying on this plan after 5 years it will carry itself for another 16 years and 144 days. Hold onto it for 15 years and it will still be in benefit for another 32+ years. That's 32 years of free life insurance.

In another 10 years you can put the matching death benefits (50K) in a trust (or bank) and drop the policies. This will double the original benefit for your (possible) future family.

If after 10 more years you don't have the extra 50K to save away then you have the option of continuing to pay on these plans and not have to rely on term, which won't be there if you live too long.

Good point.

.......................
 
Hello Mr. Walker -

If you are thinking about replacing your insurance, first thing you need to do is seek out a reputable broker (one that is licensed to write with multiple companies) and with his/her help get underwritten. This is the first step in being able to get an offeras opposed to a proposal. Never replace old coverage without a firm offer for new.

Assuming you get favorable results, expect you could improve upon your current situation. Cash value insurance does have certain unique
investment attributes - tax sheltered cash value growth, and tax free cash value distributions (with some limitations). For this purpose you want to buy as little death benefit as possible for your premiums, and you want to buy the
type of policy whose values are likely to grow the most over time. For someone as young as yourself, you might consider an equity indexed universal life policy or a variable life policy. Your broker can explain what these are as well as help you configure a policy for maximum value growth/minimum death benefit (mortality expense). If you do go this route in whole or part, transfer the cash values in your existing policies to the new policy through a so-called (after the relevant IRS code section) "1035 exchange." Your tax basis in your current policies appears to be higher than their surrender value. By doing an exchange you preserve this higher basis, which increases the amount you can withdraw tax free from the new policies. You lose this basis if you surrender the old policies first. Your broker should do projections for you, but I expect you will be pleased by how much tax free income your policy can realistically be expected to generate for the invested premiums. Business often use it for this reason to drive deferred compensation arrangements.

The above being said, the emphasis on tax free cash value accumulation/distribution will leave you with very little death benefit insurance, perhaps no more than you have now. I agree with a number of the other commentators on this site that you should consider convertible level premium durational term insurance if you want additional insurance. Your broker can discuss with you why this might be a good idea to do now, even though you apparently have no immediate need. Or not so much. I
leave it to the broker to define this type of term policy.
 
Excuse my ignorance but I'm a P&C guy.... what is PUA, WP, and GPO...

I have not read the entire thread. But here are some answers for you, sorry if some are repeats.

PUA- Paid Up Additions. This is basically how the policy builds up the cash value and increases the Death Benefit. The policy receives Dividends based on carrier performance. Those Dividends go towards purchasing extra units of insurance called Paid Up Additions. This increases the DB & CV.

WP- Waiver of Premium for Disability. This waives the premiums if you become disabled and cannot work.

GPO- Guaranteed Purchase Option, also called GIO/Guaranteed Insurability Option.
This allows you to purchase more life insurance in the future, at your current policies health rating, regardless of your health in the future. Basically it guarantees you will be able to get more coverage in the future.

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At face value, I agree that it looks like a policy with only basic benefits. $55 / month is not a lot but in my situation I haven't started a retirement fund yet. I was thinking that since I'm already used to this money coming out of my account every month, I could use it to start a solo 401k or start a SEP IRA for my company. Obviously I would add more money to the mix but right now I don't see the immediate benefit of keeping this policy. Maybe I'm being short sighted but wouldn't investing the $660 / year be better than paying for such a small life insurance policy?

What specific information would you need to know about me to help me make a decision?

You are correct, this policy has just basic benefits. It is a "final expense" purposes policy.

State Farm in general is not a good choice to build Cash Value (CV). There are far better options out there such as Guardian, Mass Mutual, New York Life, NorthWestern Mutual. They pay much higher dividends so it will build a much higher CV within the policy.

Imo, Guardian & Mass Mutual have the best WL policies on the market right now, especially if you want to build CV.
Both can give you a 3%-5% rate of return on your premiums after a 10-15 year period. And that is tax free on both the accumulation and when you pull the money out.

At this point you really need to nail down your goals. Having a permanent life insurance policy is a great thing, especially starting young. You could even do a 20pay policy that would be completely paid off after 20 years. It will guarantee that you always have coverage no matter what. Add the GIO rider to the policy and you will always be able to purchase more insurance no matter what happens to your health.

But you also need to save for retirement. So a Solo401k or SEP could be great things as well depending on how much you plan to contribute.... if you plan to contribute more than $5,500 then look at a SoloK or SEP, if it is under $5,500 then just do an IRA, no reason to do the SoloK or SEP at that low of an amount (for multiple reasons).

There is no reason you could not do both a WL and a Retirement Account.
I would certainly look at better options for the WL if I were you, especially if you like the idea of having a decent rate of return on your premium. You could do the same premium with a better performing carrier such as Guardian or Mass, and then start a IRA or other retirement account for anything above and beyond the life premiums.

What is needed to better determine what is best are more specific goals and the numbers behind them.
 
John, What I am hearing is you wish to get better return with your money by investing them. I tend to agree investing for long term will yield better growth than putting money in your WL policies; but I also think you have not grasped the true value of a participating WL policy, and how it can fit in as part of your overall portfolio. Let's forget the death benefit for a sec and purely look at the accumulation side of WL product and investment portfolio. Consider a traditional mix of portfolio made up with stocks and bonds - say 80/20 or 90/10 since you are fairly young; these money are supposed to stay in your portfolio for a long time. As you get older and reach closer toward retirement, your allocation mix may shift toward more conservative by turning those paper assets into real assets. If you an agree to that concept, then you agree that you would need additional safer assets as time passes. So that begs the question what exactly makes up the underlying growth component of your WL policies? For simplicity sake, money that you in the policies are basically handed to State Farm and into their general account; which is approximately made up of 90% bond portfolio (from treasuries to high yield bonds). Additionally, State Farm offers you guarantee cash and dividend (an asset that will only increase and never decrease in value) with your policies. So how cool would that be if you can fit your policies into that 10 to 20% mix of your portfolio managed institutionally instead of you go on your own and pay retail price; and you still got the death benefit when you die. Additionally, your need of conservative bucket will only increase over time. So my suggestion is to leave that 50 bucks a month as your 10% portfolio and start contributing a lot more to your retirement account accordingly, if you are serious about saving for retirement. Long post here, hope it helps. Ray
 
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