Should I cash out a 31 year whole life insurance policy?
I had a $50,000 whole life insurance policy purchased for me when I was born, 31 years ago. I pay $250 per year in premiums. I have no dependents and am not married, and live paycheck to paycheck. I am wondering if this is still a worthwhile investment?
Answers | 1
Is it a worthwhile investment? Yes. Should you take the money and run? If I needed the money and it was just sitting there, I would use it. Remember that you may be able to have both the investment and the coverage remain in place while accessing the cash. Rather than wipe out the policy altogether, borrow a portion of the cash, leaving enough to support the death benefit. That way, you have the policy still in place for more gain in the future. At the same time, you have the cash for daily needs. What happens if you don't pay back the loans that you take from the policy? The balance is collected when you pass away. The carrier will reduce the benefit by the amount of the outstanding loan, leaving a smaller death benefit - which is not an issue for you, with no dependents and no real need for the death benefit at that time.
Think of the policy as a vehicle for providing "working capital" which, if handled deftly, can keep on working. Use some of the cash from the loan to pay the next premium, which is quite low.
Hope that helps.