Paid Up Insurance Value?
I enjoyed your very helpful columns about Universal Life insurance, Jeff--thank you. I've had one of these policies ($200K Face value) for quite a few years. I knowingly opted to stay involved because health considerations may have made other life insurance unavailable. I also carry a similar amount of term insurance with increasing premiums, our family is grown, and our retirement is fairly well provided for. I'd appreciate any suggestions you're willing to offer.
I'm now 60 years old, and would like to lose the $901 per quarter expense. I'm told that the current cost of insurance is $141.53 per month. The cash value is $29,712, $24K is available for withdrawal, and the loan value is about $23K (7.4% interest rate). I'm having a disclosure mailed to me; but, if I understand correctly, the policy does not have a "paid up insurance" value. Does that make sense?
The insurer is Life Investors Insurance Company of America.
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posted by Jeffrey D. Voudrie @ 4:49 PM
3 comments
3 Comments:
If you don't need the insurance, then the first question is how good an investment has it been? Take a look at what you paid in premiums, and when you factor in the cost of insurance, you'll probably see that your internal rate of return hasn't been that good.
So, from an investment point of view, it may make more sense to surrender the policy, take the cash and invest elsewhere.
Doing so would mean losing the death benefit. So you have to take into account whether you really need it and how their cost of insurance compares to other coverage. Taking a loan would allow you to keep the death benefit but then you'll have to pay them interest.
The monthly cost of insurance (currently $141.53) seems fair when compared to a term life policy for a 60 year old nonsmoker; however, I'm surprised that there is no "paid up" insurance amount. Is that common to Universal Life policies?
Just depends on the policy and the company.
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