Asked by Michael  |  Submitted October 15, 2017

Is there any reason not to cancel a life insurance policy and take the cash value?

I have a life insurance policy benefits $39,975 with a cash value of $11,675,00. I pay 668.84 annually. The policy should expire in 2025. I own my home and have death benefits with a funeral home. My wife and I are both on Social Security.

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  Answers  |  3

November 14, 2017

Michael, what kind of policy is it? How old are you now? Are you in excellent health? These are questions that must be answered first in order to adequately provide advice.

For example, if you are a healthy, non-tobacco-using male at age 62, I could take your $11,675 and use it to purchase a single premium whole life policy somewhere around $20K that would more than cover any additional final expenses or provide additional income to your surviving spouse. Obviously your age and health will impact the amount able to be purchased. Doing something like this would save you the annual premium.

But if there is truly no need for a life insurance policy - meaning no one will suffer financially upon your passing - then by all means, use the cash value to pay down any other debt you may have.

$commenter.renderDisplayableName() | 12.12.17 @ 14:23

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November 15, 2017

Universal Life policy. I am 72 years old. Just got PSA test back today which says I am in good to excellent health. I smoke a pipe lmited to 3 small bowls a day. I am being monitored on high blood pressure daily for 2 months.
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Saving in WI | 11.15.17 @ 18:55

Michael, take the cash value. There is no reason for you to have life insurance. Pay debt, put the money in the bank, or invest the money. Whole life policies are not a place to invest, and that is all you are doing with this policy.

Michael Zaino, President & CEO, TZG Financial in Charlotte, NC | 11.15.17 @ 20:13

If it's a UL, then it most likely is already (or is about to start) eating into your cash value. It does this because, with that type of policy, the cost of insurance rises each year. Once the actual cost exceeds the premiums you pay, they take the difference out of your cash value. That's why it is forecasted to expire in 2025 when you'll be 80. You'll have the option to keep the coverage, but your premium will most like quintuple and will continue to rise every year thereafter. Again, if you don't need the coverage, you have the option of simply canceling the policy and taking the cash value. Or you can convert the cash value into a paid-up policy that will pass 100% tax-free to your named beneficiaries (that's the single premium whole life policy I spoke of yesterday) and never pay any additional premium. Your choice. Happy to help should you decide to go with the latter... All the best, Mike Zaino

$commenter.renderDisplayableName() | 12.12.17 @ 14:23

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November 15, 2017

This is a universal life policy. I am 72 years old and in good to excellent health. I smoke a pipe but limited to 3 small bowls per day. I do take blood pressure medicine.

$commenter.renderDisplayableName() | 12.12.17 @ 14:23

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