Been stressing about a whole life policy since I got it 2 years ago

General
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I was convinced by my financial planner to get a WL policy a couple years ago but I’ve been regretting it since. I understand it’s value as a safer investment compared to stock market and we’re already putting away some savings each month into retirement funds (401k, etc.), and the value of the WL policy as a source of loans. So we can technically afford it, but I don’t think the stress it’s been causing me is worth it. I am thinking of surrendering the policy and taking the loss and just putting that money in index funds/ETFs.

If I do, should I get additional term? Or should I bear with it until the surrender value catches up to the cumulative amount paid in premiums? Or am I thinking of this wrong and the WL policy is actually right for someone like me?

  • 38 y/o. Married with young kids. I am the only parent working at the moment
  • Own a home with about $400k left on the mortgage. Cars are paid off.
  • Annual premium is $12,500. I’m 2 years in ($25k paid), approaching 3rd year. Surrender value is currently $9,300. Would be ~7 more years until the accumulated value catches up to the cumulative amount paid.
  • I have a separate 20-yr, $2.5M term life policy as well as a 1x annual salary life insurance from work
  • My goal is not to leave my kids with a set-for-life estate. Just help support them through college/until they’re working and can support themselves, and retire to a quiet and comfortable life. If I do have something to leave to them, that’s great. But it’s a bonus.
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Consider this: As you near the end of your life, you’d like to have the ability to perform some final good deeds for family, charity, etc. The policy could give you the ability to do that. It might provide a bit of comfort during an otherwise hard time.

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If your whole life policy is causing stress and you feel secure with your term policy and other retirement savings, surrendering it could be a good option. It’s important to prioritize peace of mind and focus on investments that match your goals.

If you’re happy with your current term coverage and it meets your needs, you might not need extra coverage. Still, it’s a good idea to talk to a financial advisor who can review your full situation and give you personalized advice.

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I avoided whole life insurance (WL) because I didn’t want an extra big bill every year, so I understand your concern.

Here are two other things to think about:

  1. Is it a good WL policy? Not all policies are the same, and if the return is low, it might not be worth keeping, even if it feels like a “safe” investment.
  2. What’s your mortgage rate? While it’s not perfect, if your rate is high, paying down your mortgage at your own pace gives you a guaranteed return.
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I was an insurance agency owner for 20 years and sold life insurance for 30 years. I like a small whole life and a large term for as long and as much as you can afford. Don’t regret your whole life and buy a small one on your kids cause nobody wants to have to borrow or beg for money to bury their child. And yes, years later they can take a loan for 4-6% against the cash value.

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If you feel like whole life insurance isn’t right for you, that’s okay. But think of it this way: if you’re putting just 2%-5% of your income into something that lets you leave money for your family no matter what, helps in a financial emergency, or simply earns extra returns, why would it stress you out? Whole life is meant to give peace of mind.

It sounds like your financial planner pushed you to invest way more than you should, which isn’t right. At 38, there’s no reason to be paying $12,000 a year for life insurance unless you’re super wealthy. Whoever set that up for you wasn’t acting in your best interest. Whole life insurance should be something you start small with and, if you want, fund more aggressively as you get older.

I’m sorry this happened, but I’d recommend finding someone who can guide you through the process and set up a policy that fits your needs, with a smaller premium. They can also help exchange your current policy for one that’s better structured for you.

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As Basic Twist mentioned, whole life insurance is supposed to give you peace of mind, not stress.

Whole life isn’t for everyone, and not all policies are the same.

You’re making smart choices by thinking carefully about how to protect and grow your money. Here are some questions to consider with your financial planner:

  • Does the policy have a 10-year pay period, and how does the cash value grow after seven years when the cash value exceeds what you’ve paid in premiums?
  • How well does the policy perform once you reach that point?

Whole life insurance can seem like a bad deal in the short term because most of your money in the early years goes toward insurance costs, not cash value.

A client once told me that whole life insurance is like starting a business. It requires a lot of capital upfront, and it takes time before you see the benefits. But after a certain point (in your case, after seven years), it starts to pay off, and it’s rare to find that kind of predictability in an investment. Plus, you can eventually use it like a bank.

Yes, you could probably make more money by investing in ETFs or a retail account, but there are no guarantees. Your whole life policy offers guarantees, and if designed well, it can provide tax-free income during your retirement. And whatever’s left can be passed on to your grandchildren.

However, if this policy is making you lose sleep and your financial planner hasn’t clearly shown why it’s good for you and your wife beyond just insurance, then it might not be the right fit.

If I were you, I’d ask my financial planner to review your current plan. Also, make sure the policy is with a participating whole life insurance company. With these companies, you own a piece of the company as a policyholder, similar to being a business owner.

People who aren’t worried about how they save and spend usually aren’t financially savvy. They come to advisors like us when they’re in their 60s and want to start making good money decisions then.