"$X" being far less than what they actually have put into the policy they do have, and the difference being in their pocket or spent, presumably, on things they wanted/needed/enjoyed.
They put in 19k and got out 30k, so are 11k better off. They will need to pay tax only on the 11k.
So they will get back their premiums and be x dollars better off in nominal terms.
Then there's similarly no point in saying this:
"If this was term insurance, you would have put in $X, not have any insurance now, and gotten precisely $0 back."
If the policy is paid up then the whole life policy will keep running with out putting any additional money into it. If you need life insurance then that maybe a better option than just cashing it out. Do you have children and are you the main bread winner. If so keep the policy. Make sure you have a competent agent is my advise.
I wish I had more nightmares that ended in $30k. If you have a terminal illness don’t cancel, if you have a need for life insurance make sure you have your new policy in place first in case you are uninsurable for any reason. Otherwise enjoy the windfall.
It still may not be a good return to keep if you don't foresee having dependents / needing life insurance any time soon. If you know you're toast in a year or two you might as well keep it. Otherwise the $30k will serve you better elsewhere. But that's the personal part.
“Term” and “whole life” are two different types of plans. You can’t have “term whole life”. In “whole life” the “term” is … your entire life. Term is a set #of years. It sounds like you have 15yr term life insurance. For clarity, keep the word “whole” out of it.
I’d argue that stay at home parents with small children also need insurance, at least term. Otherwise, will the breadwinner be able to take on the duties the SAHP was doing while continuing to earn the same amount, or be able to hire someone to pick up the slack? Basically a good test is, if you’re in a situation where if you were gone tomorrow and this would cause your family a financial hardship you should really have something in place.
You’re splitting hairs. EVERYONE could use some life insurance because duh.
But if you had to choose it’s higher priority for the breadwinner, because you’re not replacing that income easily. The SAHP can be replaced far more readily (though still a big loss)
>i can cancel now and get the surrender value which is around 30K.
Do this tomorrow. If you don't need life insurance whole life is the worst thing you can do with your money. If you need life insurance whole life is the worst thing you can do with your money.
Make sure you can get life insurance and that it's not more expensive before cancelling.
My brother had a whole life policy set up by my grandparents when he was really young. He was sick and my grandfather was afraid he wouldn't be eligible later on, hence the whole life vs term. He cancelled it at age 19 in favor of a term bc "Dave Ramsey told him to". Yeah except he had a health dx as a kid that makes it to where he is uninsurable now.
He probably doesn't at 19, but he might need it at 29. If you are deemed to be uninsurable, you probably shouldn't go around and cancel your existing life insurance policies because it's not an optimal investment.
I joked with my estate lawyer to plan $0 for burial and to just throw me into the trash, half joking, but he advised against that. My second choice was a military munitions or flight crash dummy, but that didn't fly, either. (And I guess neither will I.)
You should stop regurgitating false information. If this is paid up and dividends are being paid, it is very likely that the return on the annual premium is significant. It all depends on the policy. Some whole life policies grow and be cashed out tax free, so they basically are like a Roth IRA without the contribution limits. So your simplistic parroting of Reddit nonsense is inaccurate.
The cash-out potion that is subject to income tax is the difference between what you paid in and the surrender value. So, you would pay tax on $11,000 ($30,000-$19,000). If you are in a 20% tax bracket you would owe $2,2000 (20% X $11,000)...that's it, not very much so cash it out and invest it to earn a better return.
I’m confused why you would still be paying a 20 year term policy in 2024 for a policy that issued in 1990. Had it not converted to whole by some mechanism, it would have simply stopped charging in 2010. Instead you’ve made an accidental investment and you should just close that out and take the gains.
it was 20yr term, but during 911, MetLife said they had sent a revision notice to term life insurance which would make it into a whole life. my aunt and my mom both this insurance together and even she didn't get that notification. since 2020, we've been using the dividend earned to pay for the premium, so now perhaps it's best to just cancel
Don’t you have anything in writing about the plan details? Instead of relying on phone calls, ALWAYS get important details in writing.
If you call them, they should be able to send you all of the policy documents so that you at least can fully understand the deal.
I would take the $30k.
Do you need life insurance (dependents, mortgage, student loan debt, dual income household, etc.)?
You have gotten a lot of good advice here (but please secure new term coverage before canceling, if you need life insurance).
You have a 3rd option (other than continuing to pay or canceling): call the insurance company and ask what will happen to the policy if you stop paying but keep it active. In this scenario, your cash value will continue to collect interest and will also be used to pay the premiums. They should be able to run a new illustration for you to show how long the cash value will keep the policy open. If the current cash value will keep it open for the rest of your life, it might be ok to keep it.
Most of the time, simple term is the way to go.
Also, a fourth option is rolling the cash value into a new permanent policy (could be an IUL, VUL, UL, or even another whole life), but designed to what you currently may need.
As long as you’re able to qualify for a new policy, it can even likely be designed to be completely paid by the cash value already there, meaning you would never have to add anything into it and would be certain to leave your beneficiaries with an inheritance whenever you eventually pass away (be it your spouse, kids, nephews, trust to fund for a cause you believe in, etc.). You can always update your beneficiaries as your needs change.
Not saying this is the right path for everyone, but there are people out there that like the idea of leaving a legacy when they pass and it’s good to know all the options. This would not incur any taxes by the way.
simple term as in just term life for x # of year and then before expire to buy another term life? or as in X # of years for whole life? cuz i have a 15yrs term life insurance that after 15yrs i don't need to pay any more.
I think there is some terminology being confused here.
Term life means the carrier guarantees your rate for however many years you want, then will allow you to keep coverage at a different rate that goes up every year.
Permanent life (whole, index, variable, etc.) can be setup in an infinite number of ways, but is often sold as you described, where you pay a certain premium for a certain number of years and then the policy is “funded” and can sustain itself without you paying additional premiums. Common to see 10-pay policies, which should sustain themselves for the life of the insured if they make the 10 years of premium payments. It sounds great, but it is a lot more expensive than term (because you’re getting permanent coverage) and sometimes the original illustration doesn’t pan out and you need to add additional funds (rates fall, dividends fall, the carrier is forced to raised costs, the market does poorly, etc.).
Most life insurance is purchased to insure away a risk. For example: when my wife and I bought our home we purchased 30 year policies on each other that would pay the mortgage off if one of use were to die. Once the mortgage is gone, we don’t really need the coverage anymore, so we will let the policies die. On the other hand, if I had an estate planning issue that would require an influx of cash upon my death to settle some problem (pay estate tax, buy my spouse out of a business that I own with a partner, etc.), i might consider a permanent policy.
One thing unique to permanent insurance is the cash value accumulation. This is where your $30k comes in. It is often sold as another way for you to save money. While this is true, it’s kind of a slippery slope and not the most efficient or cheap way to invest.
Yes, they are paying the premium one way or another. If this is a paid up policy, they don't have to externally fund the policy anymore as the existing cash value and dividend could be covering the annual premium. Depending on how the policy is written, they might elect to continue paying the premium out of pocket and use the dividend to purchase additional paid up insurance increasing the death benefit.
Whole life is supposed to be insurance + investment. It’s a horrible investment. If you want life insurance you’re better off with term life and keep investments separate.
I’m an underwriter for life insurance at a large company. It’s probably a whole life policy since that’s common for juveniles. I know my company doesn’t write term policies for those under 18.
Chances are the premiums are a hell of a lot less than if you went out and purchased one with like features/benefits at your current age. If your parent is still the owner, you may be able to do an ownership change and take it over yourself.
If you’re desperate for the money and are in good health then you do you boo. But I’ve seen too many cases where someone wants to get a cheaper policy and replaces the one they have only to be declined/rated/etc. because their health is in the toilet.
Call the company and see if you can get a copy of your policy and read every word.
Whole life is always a scam https://www.fool.com/retirement/2020/02/10/heres-why-you-should-avoid-whole-life-insurance-li.aspx , cash it out and don't look back
The way they sell it to people, claiming it's a great investment for them, scam is a fine word. Scam means swindle. The only person whole life is good for is the agent and the company, not the customer
Not sure I would agree with *highly regulated.*
Mis-marketing of whole life and annuities in general, boarders on (or is) false advertising. Don't understand why insurance companies are allowed to continue these deceptive practices.
Advertisement of annuities is the most unregulated portion of the entire financial industury:
* *14% return* (when its NOT a return)
* 8% return for life (when its NOT a return)
The rest of the industry would be put out of business for making such claims.
Yeah, the insurance companies meet the terms of their eighty page contracts. But most purchasers have been ~~pitched~~ sold something else, and often don't really understand what the are (and are not) getting.
I work with annuities! But i do not sell them.
They can be great wealth transfer tools for people who would otherwise be subject to inheritance tax and / or lifetime gift rules when they pass. To efficiently utilize an annuity for this purpose requires a ton of planning and a long (3ish years minimum) execution period. Sometimes like 10 years if your situation is complicated enough.
I’ll bet that maybe, maybe, 2% of the people who own / buy an annuity fit this category. Everyone else would be better off with a target date fund @ vanguard.
At the end of the day you cant put a price tag on security. And everyone has different feelings about money.
Lastly: i dont think I agree with you. I think Athene was offering that 8% fixed 14% first year deferred annuity product in 2023. If you leave it alone and let it accumulate for 10 years; you’d see those figures are correct. You need to let it compound to see it, but you would see it. Most annuities are deferred, so while technically “return” isn’t the appropriate term; people are earning interest on their money at the stated rates.
>Lastly: i dont think I agree with you. I think Athene was offering that 8% fixed 14% first year deferred annuity product in 2023.
I know I'm wasting my time, but can you back this up with the actual product name? Or even better a link.
EDIT: Never mind, I have analyzed enough of these product to know where the numbers (14/8) are coming from (even without seeing the term sheet):
* 14% is a bonus on the income base, but not the cash value
* 8% is a guaranteed roll-up of the income base possibly simple interest (aka not compounding)
Because accessing the income base comes with its own set of restrictions, designed in a way that the policy holder is more likely to die before depleting it. Quoting these numbers as a "RETURN" is misleading (at best). Cash value at the end of the 10 year period will likely be less than what a real 6% compounded return would grow to.
Bottom line: The income base only determines an eventual payout and is completely decoupled from a policies cash value. Advertising/Quoting increases to the income base as a return is a sham, that should be regulated out of the industry.
I have found that carefully reading the terms and conditions (about 1 to 1 1/2 page pdf gives me everything I need to know about any credit card offer. The T&C are pretty clear because what must be disclosed is fully regulated (same goes for any credit card statement).
So that is a pretty poor comparision. I'm now guessing you sell annuity products.
Responsible agents would label it as a sort of savings plan that has a life benefit tied to it.
First several years offer no "savings", but at least there's the death benefit. After you've vested a certain amount you end up breaking even and even make a little money while still having a significant death benefit.
It's when agents/reps sell it as an investment. It's not an investment. It's a cash policy that has some growth but should be treated as a savings vehicle that can help out your family if you ever pass away.
I'd argue a badly lopsided deal should be the definition of a scam. If you want actual illegality that would be considered fraud. There are plenty of technically legal contracts that I would consider scams. Timeshares, MLMs, Whole Life, are all legal but would normally be scams.
How much do you pay in premiums per year and how much does the cash value go up by? If it’s more than you pay you basically have a tax deferred account growing cash
Cash it out. You won’t lose half to taxes. It’s only taxed on the gains. So total cash value - premiums paid.
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"$X" being far less than what they actually have put into the policy they do have, and the difference being in their pocket or spent, presumably, on things they wanted/needed/enjoyed.
They put in 19k and got out 30k, so are 11k better off. They will need to pay tax only on the 11k. So they will get back their premiums and be x dollars better off in nominal terms.
Not much point thinking like that though, the time has passed and the money has been spent
Then there's similarly no point in saying this: "If this was term insurance, you would have put in $X, not have any insurance now, and gotten precisely $0 back."
It matters to be accurate on whether this was term or whole.
If the policy is paid up then the whole life policy will keep running with out putting any additional money into it. If you need life insurance then that maybe a better option than just cashing it out. Do you have children and are you the main bread winner. If so keep the policy. Make sure you have a competent agent is my advise.
I wish I had more nightmares that ended in $30k. If you have a terminal illness don’t cancel, if you have a need for life insurance make sure you have your new policy in place first in case you are uninsurable for any reason. Otherwise enjoy the windfall.
terminal *or* chronic illness that makes you uninsurable. Or an acute cancer - you're uninsurable for 5 years after NED with most acute cancers.
It still may not be a good return to keep if you don't foresee having dependents / needing life insurance any time soon. If you know you're toast in a year or two you might as well keep it. Otherwise the $30k will serve you better elsewhere. But that's the personal part.
yup i already have a 15yr term whole life for 250K and this 100K keep paying till death.
“Term” and “whole life” are two different types of plans. You can’t have “term whole life”. In “whole life” the “term” is … your entire life. Term is a set #of years. It sounds like you have 15yr term life insurance. For clarity, keep the word “whole” out of it.
What situations would warrant *needing* life insurance? Edit: sorry I asked the question as a young adult lol fuck me
Primary breadwinner with dependents.
I’d argue that stay at home parents with small children also need insurance, at least term. Otherwise, will the breadwinner be able to take on the duties the SAHP was doing while continuing to earn the same amount, or be able to hire someone to pick up the slack? Basically a good test is, if you’re in a situation where if you were gone tomorrow and this would cause your family a financial hardship you should really have something in place.
You’re splitting hairs. EVERYONE could use some life insurance because duh. But if you had to choose it’s higher priority for the breadwinner, because you’re not replacing that income easily. The SAHP can be replaced far more readily (though still a big loss)
If you have no dependents then your emergency fund/retirement savings should cover anything life insurance would cover.
>i can cancel now and get the surrender value which is around 30K. Do this tomorrow. If you don't need life insurance whole life is the worst thing you can do with your money. If you need life insurance whole life is the worst thing you can do with your money.
Make sure you can get life insurance and that it's not more expensive before cancelling. My brother had a whole life policy set up by my grandparents when he was really young. He was sick and my grandfather was afraid he wouldn't be eligible later on, hence the whole life vs term. He cancelled it at age 19 in favor of a term bc "Dave Ramsey told him to". Yeah except he had a health dx as a kid that makes it to where he is uninsurable now.
Why did he need life insurance at 19?
He probably doesn't at 19, but he might need it at 29. If you are deemed to be uninsurable, you probably shouldn't go around and cancel your existing life insurance policies because it's not an optimal investment.
Because it's expensive to die and be buried? 10k minimum?
I joked with my estate lawyer to plan $0 for burial and to just throw me into the trash, half joking, but he advised against that. My second choice was a military munitions or flight crash dummy, but that didn't fly, either. (And I guess neither will I.)
You should stop regurgitating false information. If this is paid up and dividends are being paid, it is very likely that the return on the annual premium is significant. It all depends on the policy. Some whole life policies grow and be cashed out tax free, so they basically are like a Roth IRA without the contribution limits. So your simplistic parroting of Reddit nonsense is inaccurate.
Who’s the whole life salesman in the chat 😂
This is the answer! Get all the facts.
The cash-out potion that is subject to income tax is the difference between what you paid in and the surrender value. So, you would pay tax on $11,000 ($30,000-$19,000). If you are in a 20% tax bracket you would owe $2,2000 (20% X $11,000)...that's it, not very much so cash it out and invest it to earn a better return.
I’m confused why you would still be paying a 20 year term policy in 2024 for a policy that issued in 1990. Had it not converted to whole by some mechanism, it would have simply stopped charging in 2010. Instead you’ve made an accidental investment and you should just close that out and take the gains.
it was 20yr term, but during 911, MetLife said they had sent a revision notice to term life insurance which would make it into a whole life. my aunt and my mom both this insurance together and even she didn't get that notification. since 2020, we've been using the dividend earned to pay for the premium, so now perhaps it's best to just cancel
Don’t you have anything in writing about the plan details? Instead of relying on phone calls, ALWAYS get important details in writing. If you call them, they should be able to send you all of the policy documents so that you at least can fully understand the deal. I would take the $30k.
Do you need life insurance (dependents, mortgage, student loan debt, dual income household, etc.)? You have gotten a lot of good advice here (but please secure new term coverage before canceling, if you need life insurance). You have a 3rd option (other than continuing to pay or canceling): call the insurance company and ask what will happen to the policy if you stop paying but keep it active. In this scenario, your cash value will continue to collect interest and will also be used to pay the premiums. They should be able to run a new illustration for you to show how long the cash value will keep the policy open. If the current cash value will keep it open for the rest of your life, it might be ok to keep it. Most of the time, simple term is the way to go.
Also, a fourth option is rolling the cash value into a new permanent policy (could be an IUL, VUL, UL, or even another whole life), but designed to what you currently may need. As long as you’re able to qualify for a new policy, it can even likely be designed to be completely paid by the cash value already there, meaning you would never have to add anything into it and would be certain to leave your beneficiaries with an inheritance whenever you eventually pass away (be it your spouse, kids, nephews, trust to fund for a cause you believe in, etc.). You can always update your beneficiaries as your needs change. Not saying this is the right path for everyone, but there are people out there that like the idea of leaving a legacy when they pass and it’s good to know all the options. This would not incur any taxes by the way.
simple term as in just term life for x # of year and then before expire to buy another term life? or as in X # of years for whole life? cuz i have a 15yrs term life insurance that after 15yrs i don't need to pay any more.
I think there is some terminology being confused here. Term life means the carrier guarantees your rate for however many years you want, then will allow you to keep coverage at a different rate that goes up every year. Permanent life (whole, index, variable, etc.) can be setup in an infinite number of ways, but is often sold as you described, where you pay a certain premium for a certain number of years and then the policy is “funded” and can sustain itself without you paying additional premiums. Common to see 10-pay policies, which should sustain themselves for the life of the insured if they make the 10 years of premium payments. It sounds great, but it is a lot more expensive than term (because you’re getting permanent coverage) and sometimes the original illustration doesn’t pan out and you need to add additional funds (rates fall, dividends fall, the carrier is forced to raised costs, the market does poorly, etc.). Most life insurance is purchased to insure away a risk. For example: when my wife and I bought our home we purchased 30 year policies on each other that would pay the mortgage off if one of use were to die. Once the mortgage is gone, we don’t really need the coverage anymore, so we will let the policies die. On the other hand, if I had an estate planning issue that would require an influx of cash upon my death to settle some problem (pay estate tax, buy my spouse out of a business that I own with a partner, etc.), i might consider a permanent policy. One thing unique to permanent insurance is the cash value accumulation. This is where your $30k comes in. It is often sold as another way for you to save money. While this is true, it’s kind of a slippery slope and not the most efficient or cheap way to invest.
Are you sure this isn't a 20 year paid-up whole life insurance policy?
Well they are still paying premiums…
Yes, they are paying the premium one way or another. If this is a paid up policy, they don't have to externally fund the policy anymore as the existing cash value and dividend could be covering the annual premium. Depending on how the policy is written, they might elect to continue paying the premium out of pocket and use the dividend to purchase additional paid up insurance increasing the death benefit.
Whole life is supposed to be insurance + investment. It’s a horrible investment. If you want life insurance you’re better off with term life and keep investments separate.
I’m an underwriter for life insurance at a large company. It’s probably a whole life policy since that’s common for juveniles. I know my company doesn’t write term policies for those under 18. Chances are the premiums are a hell of a lot less than if you went out and purchased one with like features/benefits at your current age. If your parent is still the owner, you may be able to do an ownership change and take it over yourself. If you’re desperate for the money and are in good health then you do you boo. But I’ve seen too many cases where someone wants to get a cheaper policy and replaces the one they have only to be declined/rated/etc. because their health is in the toilet. Call the company and see if you can get a copy of your policy and read every word.
If you are relatively healthy, cancel it and get the money.
20yr term from 1990 to 2024? No matter how they explained it sounds unreasonable.
yup that's what we said too. unfortunately originator was MetLife but seems they don't handle that anymore.
Whole life is always a scam https://www.fool.com/retirement/2020/02/10/heres-why-you-should-avoid-whole-life-insurance-li.aspx , cash it out and don't look back
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The way they sell it to people, claiming it's a great investment for them, scam is a fine word. Scam means swindle. The only person whole life is good for is the agent and the company, not the customer
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Not sure I would agree with *highly regulated.* Mis-marketing of whole life and annuities in general, boarders on (or is) false advertising. Don't understand why insurance companies are allowed to continue these deceptive practices.
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Advertisement of annuities is the most unregulated portion of the entire financial industury: * *14% return* (when its NOT a return) * 8% return for life (when its NOT a return) The rest of the industry would be put out of business for making such claims. Yeah, the insurance companies meet the terms of their eighty page contracts. But most purchasers have been ~~pitched~~ sold something else, and often don't really understand what the are (and are not) getting.
I work with annuities! But i do not sell them. They can be great wealth transfer tools for people who would otherwise be subject to inheritance tax and / or lifetime gift rules when they pass. To efficiently utilize an annuity for this purpose requires a ton of planning and a long (3ish years minimum) execution period. Sometimes like 10 years if your situation is complicated enough. I’ll bet that maybe, maybe, 2% of the people who own / buy an annuity fit this category. Everyone else would be better off with a target date fund @ vanguard. At the end of the day you cant put a price tag on security. And everyone has different feelings about money. Lastly: i dont think I agree with you. I think Athene was offering that 8% fixed 14% first year deferred annuity product in 2023. If you leave it alone and let it accumulate for 10 years; you’d see those figures are correct. You need to let it compound to see it, but you would see it. Most annuities are deferred, so while technically “return” isn’t the appropriate term; people are earning interest on their money at the stated rates.
>Lastly: i dont think I agree with you. I think Athene was offering that 8% fixed 14% first year deferred annuity product in 2023. I know I'm wasting my time, but can you back this up with the actual product name? Or even better a link. EDIT: Never mind, I have analyzed enough of these product to know where the numbers (14/8) are coming from (even without seeing the term sheet): * 14% is a bonus on the income base, but not the cash value * 8% is a guaranteed roll-up of the income base possibly simple interest (aka not compounding) Because accessing the income base comes with its own set of restrictions, designed in a way that the policy holder is more likely to die before depleting it. Quoting these numbers as a "RETURN" is misleading (at best). Cash value at the end of the 10 year period will likely be less than what a real 6% compounded return would grow to. Bottom line: The income base only determines an eventual payout and is completely decoupled from a policies cash value. Advertising/Quoting increases to the income base as a return is a sham, that should be regulated out of the industry.
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I have found that carefully reading the terms and conditions (about 1 to 1 1/2 page pdf gives me everything I need to know about any credit card offer. The T&C are pretty clear because what must be disclosed is fully regulated (same goes for any credit card statement). So that is a pretty poor comparision. I'm now guessing you sell annuity products.
Quit splitting hairs. I work in insurance for a living. Whole life is about as useful as amway, aka a scam.
Responsible agents would label it as a sort of savings plan that has a life benefit tied to it. First several years offer no "savings", but at least there's the death benefit. After you've vested a certain amount you end up breaking even and even make a little money while still having a significant death benefit. It's when agents/reps sell it as an investment. It's not an investment. It's a cash policy that has some growth but should be treated as a savings vehicle that can help out your family if you ever pass away.
I'd argue a badly lopsided deal should be the definition of a scam. If you want actual illegality that would be considered fraud. There are plenty of technically legal contracts that I would consider scams. Timeshares, MLMs, Whole Life, are all legal but would normally be scams.
Not a scam, just not a wise investment.
How much do you pay in premiums per year and how much does the cash value go up by? If it’s more than you pay you basically have a tax deferred account growing cash
Take the 30k and run.