‘Despite paying $10,000, cash value is $7,000’: Parents have been paying into State Farm Universal Life Insurance for me. Now 33, found out about it and asked to start paying on it. Worth it?

Hey Money Minder,

So, I’ve got this Universal Life Insurance policy worth $150,000 that my parents took out for me when I was 20. It started at $25,000, and now I’m 33 with a wife and a little one to think about.

I’m all about making sure my family is covered, but I’m not sure if this policy is the best option. Right now, I’m paying $140 a month, and the cash value is only $7,000, even though my parents have put in close to $10,000 already. Do you think switching to term life insurance might make more sense for me? I’m totally new to all of this!

Looking forward to your advice,

Life Insurance Rookie

Farewell,
Life Insurance Rookie

Response from THE MONEY MINDER:

Hello There,

Congratulations on taking the initiative to evaluate your Universal Life Insurance policy and seek advice on potentially switching to a more suitable option. It’s essential to ensure your family is adequately protected while also being financially prudent. Given your current situation and concerns, it might be worth considering switching to a term life insurance policy.

Term life insurance is typically more affordable and straightforward compared to universal life insurance. It provides coverage for a specific term, such as 10, 20, or 30 years, offering a death benefit if something were to happen to you during that period. Based on your age, family circumstances, and the information provided, a term life policy could be a more cost-effective solution for your coverage needs.

Before making any decisions, I recommend consulting with a financial advisor or insurance expert who can analyze your specific situation and help you determine the best option. They can assess your coverage needs, evaluate different policy options, and provide personalized recommendations to ensure you have the right protection in place for your family.

Term life insurance might be a more suitable choice at this stage in your life, offering the coverage you need at a more manageable price point. It’s always wise to explore your options and make an informed decision that aligns with your current financial goals and family needs. All the best from THE MONEY MINDER as you navigate this important decision.