From Whole to Term life question?

General
1

When I was 11, my father bought a $100k whole life (WL) policy for me at $30 a month. Now that I’m in my early 30s, the cash value seems low—just under $4k. My father wants me to either take over the payments or cash it out and cancel the policy.

I recently got a quote from Policy genius for a $1M, 20-year term life (TL) policy at around the same monthly cost. It seems like switching to TL is the better option, but I don’t want to miss any important benefits that might come with the WL. Does anyone have advice on which choice makes the most sense in this situation?

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2

Keep the WL policy $30 a month won’t break the bank. You can always add any term life coverage you want on top of it.

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3

I totally agree with you.

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4

You can actually do both.

  • A) Keep the WL policy and consider asking about the cost if you paid annually it’s only $360 a year for coverage that lasts your entire life.

  • B) Go ahead and buy the term policy for additional protection.

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Many people refer to different types of permanent life insurance as “whole life,” so I’d recommend confirming that your current policy is truly traditional whole life insurance, guaranteed for life.

If it is whole life and not something like universal life or another type of permanent coverage, you’ll never find a better rate than $30 per month for $100k, so keep that in mind before switching to term.

If you’re confident you won’t need or want permanent life insurance in the future, and prefer the option of getting much more term coverage for a similar cost (knowing that the level premium on term will eventually end), then replacing the WL with term might be a good choice.

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6

Never get rid of that whole life policy you’ll never get those rates again. You can’t turn back the clock and become younger!

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7

What’s your goal with the policy?

Even if the cash value is low (you might want to discuss with your agent why that is), you’ll have access to the growth feature for your entire life. If you choose term insurance, as you probably know, you’ll only be covered for a specific period.

I recommend asking about any surrender charges to determine if it’s worth giving up the policy. If your agent has your best interests in mind, they should provide an objective opinion.

Also, consider looking into AAA-rated companies for the best service and products. I can suggest some options if you’re interested.

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8

Your father is smart.

Keep the whole life policy and balance it with a term policy.

$60 is a great price for $1.1 million in coverage!

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9

Another way to consider this is: if you start investing $360 per year now, you’d need to earn over 5.05% annually tax-free (which is over 7% on a taxable equivalent) until age 85 to accumulate $100,000 in that account. The death benefit alone makes it a pretty good deal.

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Replacing that policy would be a huge mistake. It allows you to fund the insurance at an excellent rate with a low premium that remains unchanged. You were comparing apples to oranges it’s completely illogical!

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Thank you for all the insights! They’ve really helped me shift my perspective, and I think I’ll hold onto the policy for now. I appreciate it!