Don’t worry about feeling embarrassed—it’s commendable that you’re doing your research now. Here’s how you can handle your whole life policy and some insights on whole vs. term life insurance:
Canceling Your Policy During Underwriting:
Contact Northwestern Mutual: Reach out to your Northwestern Mutual advisor and inform them of your decision to cancel the whole life policy. Since you’re still in the underwriting process, you should be able to cancel without facing any penalties.
Potential Refund: You can expect a full refund of the premiums you’ve paid so far (approximately $700), provided that the policy hasn’t been officially issued yet.
Term Life vs. Whole Life Insurance:
Assess Your Situation: Given your age, income, and lack of dependents, term life insurance might be more suitable. It offers death benefit coverage for a specific period (e.g., 20 or 30 years) at a lower premium compared to whole life.
Whole Life Considerations: While whole life provides a death benefit and accumulates cash value over time, its premiums are generally higher than term life. It may be more beneficial for individuals with dependents or long-term financial objectives.
Review Your Employer’s Coverage:
Evaluate Current Benefits: Take into account the life insurance coverage provided by your employer. This coverage might suffice, particularly if you’re single and without dependents.
Consult HR: Discuss your life insurance needs with your HR representative to understand the specifics of your employer-provided coverage.
Alternatives to Whole Life:
Consider Term Life: As previously mentioned, term life insurance offers straightforward death benefit coverage at a lower cost, which may align better with your current circumstances.
Explore Retirement Investments: Look into investment options outside of life insurance for your retirement savings. Consider IRAs, Roth IRAs, or investment accounts that match your risk tolerance and financial objectives.
Pros and Cons of Whole Life:
Benefits of Whole Life: It guarantees lifelong coverage, builds cash value over time, and may offer loan options against the policy’s cash value. However, these benefits come at a higher premium.
Drawbacks of Whole Life: Premiums are typically higher than term life insurance, and the growth of cash value might be less competitive compared to other investment opportunities. Moreover, accessing the cash value through loans could reduce the death benefit and accrue interest charges.
Next Steps:
Contact Northwestern Mutual: Initiate the cancellation of your whole life policy and inquire about receiving a full refund of your premiums.
Reassess Your Insurance Needs: Evaluate your current life insurance coverage provided by your employer and determine if additional coverage is necessary. Term life insurance might be more appropriate based on your current situation.
Explore Investment Options: Research alternative investment strategies for achieving your retirement savings goals. Consider seeking advice from a fee-based financial advisor rather than one working on commission.