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 Posted: Wed Sep 30, 2009 4:06 pm Post subject: What if cash value is higher than face amount? |
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| It seems that in most instances on this forum, the questions on surrendering polices refer to a policy where the face amount is higher than the cash value. My domestic partner has a small whole life policy that his Dad took out when he was in his teens. He is now 57. The face amount of the policy is $3200 and the Cash Value and Net Surrender value is $4058. Would it be smarter to surrender the policy and get the larger amount? Sorry, I know nothing about whole life insurance policies. |
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limabe
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| Posted: Thu Oct 01, 2009 5:30 am Post subject: |
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There are a lot of things to consider. I agree that the whole life insurance premiums are more expensive. But, what other option would he have once he cancels the whole life policy?
With a term life policy he won't even be able to take a loan as it doesn't generate a cash value. Also, I don't think it would be easier for him to get a good term life coverage now.
Steven |
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steven
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| Posted: Thu Oct 01, 2009 4:58 pm Post subject: |
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Do you know how much the sum assured is? Is he still paying the premium? How much is the annual premium?
I am afraid we need more information before we could figure out the best way to deal with the situation.
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Xoseph
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| Posted: Thu Oct 01, 2009 5:30 pm Post subject: |
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| Thank you for replying. I'm sorry, I don't know what "sum assured" means. But, yes, he is still paying the premium -- its very small at $34 annually. The account has $2687 total accumulated dividends at interest. Currently, we could use the money, and he has another larger whole life insurance policy which we will leave alone. Would it make sense to take out a loan of $2000 against this policy instead of surrendering it? Or, does it make more sense just to leave it alone altogether? |
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limabe
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| Posted: Fri Oct 02, 2009 7:05 pm Post subject: |
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Whole Life Insurance policies are subject to 7702 rules in which the Death Benefit has to be larger then the cash value at least till age 100 (this is known in the industry as the corridor of insurance).
The cash value can NEVER (till after age 100) be greater then the Death Benefit of the policy. Limabe....on your most recent statement what was the total Death Benefit? |
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Marpol
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| Posted: Fri Oct 02, 2009 8:21 pm Post subject: |
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Thanks Marpol, for the explanation -- didn't know that. It looks like the death benefit is currently at $5,914 (dividends plus face amount).
Linda
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| Posted: Fri Oct 02, 2009 8:31 pm Post subject: |
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Linda,
Because of the minimal cost of this policy i would probably say keep it. It is obviously not enough insurance and the cash value will never make you rich, but it sounds like it would fill in for a final expense policy. That being said you should probably contact a local independent agent and have him or her review your situation in detail. |
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Marpol
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