Surrender Life Ins?

[Pumbaa_]

Ok BB'ers - I have a life ins policy for $2k insurance value, issued a year after I was born. Apparently my parents bought one of those gerber life policies.

Now, a few decades later (and we will leave it at that TYVM), i just got an annual statement. Last year 3.14 dividends, cash surrender value $1744.98.

Can you think of any reason NOT to cash it in? I have more than enough LI through other avenues.

Thanks for your thoughts

 

[tvguy]

DW and I both are 55+ and both our parents bought policies when we were born. Different companies, but for both the premiums are around $30 a year,
Figure that is the one sure thing we will leave our kids. Only hang onto them because of sentimental value. I don't even know what the death benefit is. DW tried to figure out, and all the guy they sent out wanted to do was sell her an additional $500,000 I coverage, which of course, is the whole reason they marketed those policies to new parents, to get new customers 20 or 30 years later.

 

[pyrxtc]

Ok BB'ers - I have a life ins policy for $2k insurance value, issued a year after I was born. Apparently my parents bought one of those gerber life policies.

Now, a few decades later (and we will leave it at that TYVM), i just got an annual statement. Last year 3.14 dividends, cash surrender value $1744.98.

Can you think of any reason NOT to cash it in? I have more than enough LI through other avenues.

Thanks for your thoughts

My Uncle had one when he passed away 2 years ago. his Mom had been paying on it the whole time. My Aunt was surprised and it helped pay off a few things.

 

[Pumbaa_]

No premiums are paid on this policy. Thinking good time to surrender

 

[badiggio]

Usually in whole life policies,it's one or the other.If a death benefit is paid you don't collect on the savings portion.If your covered and your dependents are taken care of by other policies ,go ahead and treat yourself.
Now just imagine how much money there would be if a term insurance was bought and the difference in premium was invested.
Life insurance ***. thrive on whole life.

 

[APiratesLifeForMe2]

Probably a good time to cash it in. If I understand you correctly, the face value is only $2000 and the value is over $1700? Usually when policies are worth more than paid in, you get taxed on the gains. Of course it all depends on your specific policy. Most important thing is that you have sufficient life insurance and it sounds like you do.

$2000 face value doesn't go far these days. Cash it in and use the surrender money to put a deposit in for a Disney vacation!

 

[RitaE]

If you have other life insurance, then a $2000 is pretty insignificant and the cash value is almost equal to that anyway. Look at it this way, if you were to die it would be another burdensome detail that your spouse or whomever would have to handle.

I'd probably just cash it in and then either spend the money or use it to fund part of this year's IRA or something.

 

[DisneyBrooke81]

There will be a gain when you surrender it, but that would be the only thing.

 

[sandynd]

The only other consideration (for other people reading this, not the OP) is if this is the only life insurance you have for now, keep it because you are guaranteed acceptance if you want to buy more coverage, no matter what your medical situation is. DH's parents had one of those little policies on him, and he didn't think about getting life insurance in his 20's. When he was 30, he developed an uninsurable condition. When we got married and wanted to insure our mortgage, he couldn't get insurance. We went to his mom to take over the little gerber policy and increase it, but she had cashed it out - so we have no life insurance on him. I was finally able to get one of those no-medical, low-coverage, very expensive policies to cover his funeral, but other than that, we are unprotected. So just make sure that you either have enough coverage in place or really don't care about future insurability before you cash out!

 

[nalajms]

If you don't need the money, I say keep it. You're probably making a better return on that 1700 than you would in the bank. Most whole life policies start being profitable after 15 or so years. The insurance company would love for you to surrender it!

You should double check your insurance amount. As your surrender value grows, the insurance amount would need to grow with it, otherwise it is no longer a life insurance.

Also be aware that you would pay taxes on all the gains once you surrender it. The insurance company might not withhold fed tax for you. This means if your parents only paid say $1000 total into the policy, you'll pay taxes on the $700 at the current long term capital gains rate.

 

[KGK]

If you don't need the money, I say keep it. You're probably making a better return on that 1700 than you would in the bank. Most whole life policies start being profitable after 15 or so years. The insurance company would love for you to surrender it!

You should double check your insurance amount. As your surrender value grows, the insurance amount would need to grow with it, otherwise it is no longer a life insurance.

Also be aware that you would pay taxes on all the gains once you surrender it. The insurance company might not withhold fed tax for you. This means if your parents only paid say $1000 total into the policy, you'll pay taxes on the $700 at the current long term capital gains rate.

Insurance company would love you to surrender it!! absolutely correct!
Policy probably has a guaranteed interest rate of between 2-4%.
You are no longer paying on it.
You probably have the right to get additional coverage without evidence of insurabilty.

Taxes are NOT long term capital gains. Taxes are at interest rate (what ever your tax rate is). not such a good thing.

Biggest money mistake people make is thinking "found" money is not important and blowing it on something.

Keep the policy or do a tax-free transfer to another policy. Call a reputable insurance agent (yes they do exist).

 

[tzolkin]

If you don't need the money, I say keep it. You're probably making a better return on that 1700 than you would in the bank. Most whole life policies start being profitable after 15 or so years. The insurance company would love for you to surrender it!

You should double check your insurance amount. As your surrender value grows, the insurance amount would need to grow with it, otherwise it is no longer a life insurance.

Also be aware that you would pay taxes on all the gains once you surrender it. The insurance company might not withhold fed tax for you. This means if your parents only paid say $1000 total into the policy, you'll pay taxes on the $700 at the current long term capital gains rate.

I'm really not sure what you're talking about that "most" whole life policies are profitable after a few years. The way a straight whole life policy works is that it's scheduled to endow when the insured reaches age 100, which means that the cash value created by the accumulation of premium is scheduled to equal the face amount (death benefit) of the policy at age 100.

I doubt there would be any gains for the OP to pay taxes.

I would cash it in. The $1700 is going to work for you better. You can invest it or use it to pay off debt (thus saving money on interest).

Usually in whole life policies,it's one or the other.If a death benefit is paid you don't collect on the savings portion.If your covered and your dependents are taken care of by other policies ,go ahead and treat yourself.
Now just imagine how much money there would be if a term insurance was bought and the difference in premium was invested.
Life insurance ***. thrive on whole life.

Bingo!

And you are also correct that you do not get both the death benefit and cash value. They will try to tell you that it's "your" money, but if you die they keep it and if you want the money without surrendering the policy they will loan it to you and charge you usually around 8% interest. I can't tell you how many people I know who were sold whole life as an "investment" to save for their children's education, new home, retirement, etc.

 

[AmberHeartsDisney]

I dont see how if you die 2,000 will do "much" cash it in and get a term life plan if you need one.