Hello…I have a question about my parents’ universal life insurance policy. They’ve been contributing the initial premium of $100 monthly but haven’t added any additional funds to the plan. If they decide to cancel the policy, will they get any money back?
I’ve heard that with universal life insurance, the cash value grows over time based on premiums and investments. Do they only get a return if they’ve contributed more than the initial amount, or do they have a right to some refund based on the premiums they’ve already paid?
Hi, Factors to Consider:
- Cash Value:
- Accumulates from premiums and investment earnings over time.
- Surrender Charges:
- Fees imposed if the policy is canceled before a specified period (usually 10-15 years) to cover administrative costs and lost profits.
Potential Refund Scenarios:
- Free Look Period:
- If within 10-30 days, a full premium refund is usually available upon cancellation.
- Cash Value Exceeds Surrender Charges:
- May receive a portion of the original premiums if the cash value is greater than the surrender charge.
- Cash Value Less Than Surrender Charges:
- May receive no money back or even owe additional money if the cash value is less than the surrender charge.
If your folks cancel their universal life policy, they might get some cash back, but it depends on how their policy is set up. Usually, the cash value builds up over time with extra payments and investments. Since they haven’t added more than the initial $100 monthly, the refund might be limited. But it’s worth checking with their insurance company to see exactly what they’re entitled to.