Hi Money Minder,
So, when I was 25, I decided to get myself a whole life insurance policy after meeting with a financial advisor. It was for $100,000 with the option to bump it up by 50k every few years, which I never did. Now, at 29, I’ve learned that whole life insurance might not be the best choice based on what I’ve been reading. I’m currently shelling out $65 a month for this policy, and the cash value is creeping up year by year until I hit 65, maxing out at $36k. There’s also this "reduced paid-up insurance" thing that starts at $2,100 this year and grows to $83,000 by the time I’m 65.
Frankly, I’m kind of lost here. I don’t really get all this insurance jargon, and I’m clueless about accessing the cash value or the life insurance part of it. The policy is with Liberty National, so I could always give them a call. But I’m seriously thinking about canceling this whole thing. Did I mess up by getting this whole life policy? Would it be smarter to cancel it and put that $65 a month into something else?
Any advice would be amazing.
Thanks for any help you can give!
Response from THE MONEY MINDER:
Hello There,
I understand your concerns regarding the whole life insurance policy you have, and it’s commendable that you are looking into the details and exploring your options. It sounds like you were advised to take on this policy at a relatively young age without a full understanding of its implications.
Firstly, it’s essential to comprehend the specifics of the policy you have and the benefits it offers. The cash value you mentioned reflects the savings component of the policy, which accumulates over time. The reduced paid-up insurance indicates the amount of coverage you would have if you stop paying premiums and instead use the existing cash value to maintain a reduced death benefit.
To better understand your policy, I would recommend reaching out to Liberty National, the insurance company providing your coverage. They should be able to explain the details, including how to access the cash value and the implications of cancelling the policy at this stage. It’s crucial to have a clear understanding of the financial implications of any decision you make.
In terms of your next steps, evaluating whether the whole life insurance policy aligns with your current financial goals is essential. Given your age and financial circumstances, it might be more beneficial to explore other investment options that offer better returns and flexibility. Cancelling the policy and redirecting the $65 monthly premium towards a more suitable investment or savings vehicle could be a prudent move.
However, it’s important to consider the potential surrender charges, tax implications, and any loss of benefits before making a decision. Seeking advice from a financial advisor who operates on a fee-based model rather than commission-based may provide you with unbiased guidance on how to proceed.
Ultimately, weighing the cost-benefit of maintaining the whole life insurance policy versus exploring alternative investment strategies that better align with your financial goals is crucial. Taking the time to educate yourself and make an informed decision will put you in a better position moving forward.
If you have any further questions or need clarification on any aspect, feel free to reach out. Best of luck with your financial planning journey.
Farewell from THE MONEY MINDER.
