The policy is acting in two ways for you and your wife.Hello,
My wife's father took out a whole life insurance policy on her with Western Mutual when she was a child. He is a physician, talks of retiring to become a day trader, and now that my wife is 40 years old and has been married away, he has belatedly given the policy over to her (our) management because he no longer wants to pay the premiums.
The annual premium is about $1700, total net death benefit is about $250k, and the total accumulated net worth is about $22k (at some point he took out an approximate $4k loan against it, which is still displaying).
I can't imagine that we'd really need $250k should my wife die (God forbid) since we've well beyond that amount in our brokerages. We're otherwise pretty normal people with three kids, renting now until we feel the market is better for buying, both employed, etc. I'm tired of paying the premium and have been trying to just clean things up, cutting off some of these automated transactions each month.
The question, since I understand very little about life insurance:
Is this policy in some way uniquely valuable after all this time, and should I think twice about cashing out? A couple of friends have said something like "oh I wouldn't part with that policy!" and I haven't any idea why that'd be the impression.
First, it is providing a net of about $230k of death benefit. That’s the $250k face amount minus the $22k net cash value. You don’t give any indication about your need for death benefit protection on your wife, to replace her income if she dies and to help support minor children. If she does need a death benefit, she’d be better off with a level term policy, which would be much cheaper.
Second, it’s providing some return on the $22k cash value. You could consider that as part of your fixed income allocation. As Rex66 said, you can get an inforce illustration and we can help you figure out the “return on investment” on the cash value. It might be in the 3-4% range.
I like your approach of trying to clean up and simplify your financial life. There’s nothing uniquely valuable about this policy. It’s just providing a death benefit and a fixed income return on $22k.
If you’re so inclined, I would see nothing wrong with making sure that your wife has adequate life insurance (which might require buying a new term life policy, and then surrendering the whole life policy. I expect that the $22k cash value could be put to better use elsewhere.
While you’re at it, thank her dad for the generous gift of $22k in cash value.
Post back with questions.
Statistics: Posted by Stinky — Thu Apr 25, 2024 10:03 pm