Cashing out life insurance policy taken out on me? (pay, income, mortgage)
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I had a life insurance policy taken out on me as a child. It is now worth over $100k. My husband already has another policy on me from his job that his worth his yearly salary. The cash value of the 100 k policy is only 3 grand and you can take out a loan against it as well, though we would never do this. It is loosing cash value yearly. My husband and I could really use the money right about now, and I'm wondering if there is any point in having such a large policy on me? Would you cash it out or leave it?
obtain additional Term Insurance. Once that coverage is in place, surrender this policy. DO NOT DO ANYTHING UNTIL YOU HAVE NEW COVERAGE IN PLACE. The amount you have through group is probably not enough.
I'm wondering if there is any point in having such a large policy on me?
Absent this other business... would you have a LI policy at all?
Few SAHM's would or need it.
Quote:
I had a life insurance policy taken out on me as a child ... (death benefit) over $100k.
The cash value ... is only 3 grand. Would you cash it out or leave it?
obtain additional Term Insurance. Once that coverage is in place, surrender this policy. DO NOT DO ANYTHING UNTIL YOU HAVE NEW COVERAGE IN PLACE. The amount you have through group is probably not enough.
Obtain the additional term insurance through this insurance company? I have little to no knowledge about insurance policies.
I assume the policy is 100% prepaid? In other words, you aren't making premium payments?
If that's the case, I would advise against cashing it in and cancelling the policy. That would be throwing away $97,000 in the event of your untimely passing.
If you need some cash, I would instead advise taking a out a loan against the cash value. If you do this you'll still have the death benefit intact, minus the amount of the loan. You will have to pay interest on the loan each year unless and until you pay it back. If you don't borrow the full value - there are probably limits on what you can borrow anyway - the interest can usually be paid out of the remaining cash value until it's exhausted.
If you are still paying premiums on this policy, I agree with cashing it in and buying some cheap term insurance. How much you need would depend on the financial burden that your family would be facing if you passed away. This would include the cost of your funeral and possible final medical expenses, plus replacement of your income if you work outside the home or the cost to provide care for any kids if you're a SAHM.
Absent this other business... would you have a LI policy at all? Few SAHM's would or need it.
I'd look into convert it to a disability policy.
I strongly disagree.
Hopefully, nothing happens to the SAHM but what if she does die? The father will have many more expenses in the upcoming years. Full time childcare while they are young and part time child care when they are older. Even things as simple as grocery shopping, doing the laundry, cooking all the meals, running errands, caring for sick children & school related activities will all fall on the widower. Wouldn't it be better if he had money from a life insurance policy to pay for others to take up the slack?
Also, most SAHM don't stay SAHM their entire married life. Many return to the work force, often to help pay for college expenses of their children or to help save for retirement or to pay off the mortgage. Wouldn't a LI policy come in very handy in those situations?
BTW Every SAHM that we know has some life insurance, sometimes not as much as the breadwinner, but enough to pay for at least several years of child care/housekeeping services or enough to pay for the father to take several years off of his job for him to be a full-time parent.
A few of the SAHM that we know have substantial life insurance policies, because they intend to return to their careers as teachers, or attorneys or engineers when their children start school full time (or may be a few years after that). The loss of that future family income is something to consider..
Last edited by germaine2626; 06-27-2013 at 11:56 AM..
I assume the policy is 100% prepaid? In other words, you aren't making premium payments?
If that's the case, I would advise against cashing it in and cancelling the policy. That would be throwing away $97,000 in the event of your untimely passing.
If you need some cash, I would instead advise taking a out a loan against the cash value. If you do this you'll still have the death benefit intact, minus the amount of the loan. You will have to pay interest on the loan each year unless and until you pay it back. If you don't borrow the full value - there are probably limits on what you can borrow anyway - the interest can usually be paid out of the remaining cash value until it's exhausted.
If you are still paying premiums on this policy, I agree with cashing it in and buying some cheap term insurance. How much you need would depend on the financial burden that your family would be facing if you passed away. This would include the cost of your funeral and possible final medical expenses, plus replacement of your income if you work outside the home or the cost to provide care for any kids if you're a SAHM.
Yes, the policy is pre-paid. Thank you for the info.
I had a life insurance policy taken out on me as a child. It is now worth over $100k. My husband already has another policy on me from his job that his worth his yearly salary. The cash value of the 100 k policy is only 3 grand and you can take out a loan against it as well, though we would never do this. It is loosing cash value yearly. My husband and I could really use the money right about now, and I'm wondering if there is any point in having such a large policy on me? Would you cash it out or leave it?
Our 30 year son has a LI policy that we took out when he was very young. The death benefit is $22, 000 and the cash value about $2,500, however, the yearly payment is $75 and the yearly dividend the last few years has been $200 a year. So, each year the policy gains $125 a year in cash benefits.
Take a look at the details of your policy before you decide what to do..
Absent this other business... would you have a LI policy at all?
Few SAHM's would or need it.
I disagree!
We have a policy on me, and it was bought when the kids were born.
My husband would have had plenty of new expenses if I died, both child-related and house-related.
It was a wise, well thought out purchase.
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