I bought a small ($5,000) life insurance policy back in 1968 when I was 19 and still have it. I realize that I don’t need it and never really did, I never married and have no children so there is nobody to protect.
I looked into cashing in the policy a few years ago. With the dividends going towards buying additional insurance over the years, the cash value had risen to over $25,000. Even after deducting a half century of premiums ($100/year), the extra income would have put me over the limit for some tax benefits. I finally decided to borrow about half of it with no intention of ever paying back. The annual dividends increase the cash value each year by more than the interest on the loan so the cash value will never reach zero, which would trigger the taxes. When I die, the loan amount will be deducted from the death benefit with no tax consequences. I may eventually borrow more.
If I had to do it over again, I likely wouldn’t have gotten the policy, or at least had gotten a term instead of a whole-life policy.
Yesterday I happened to run into the widow of the agent who sold me the policy, she’s a resident of the same assisted living facility as my brother. I wonder how much he made from selling me the policy.
My wife and I revisit this question annually now. Our boys are grown, but our oldest will need continued financial support all his life.
Our intent is to phase out our term insurance over 5 years or so, as the current amounts would allow the survivor to pay off the remaining mortgage and replace salary to age 60, at which point we expect to have plenty for retirement.
We also expect to shortly take out a 2nd to die policy for which our oldest will be the beneficiary. It will fund a trust uniquely for him when the last of us passes.
One factor that could come into play is whether the policy has a “Chronic Illness” benefit that could enable you to accelerate a portion of the death benefit to pay for Long Term Care expenses in old age. That could be a reason to keep the life policy when the “income protection need” has been met.
We dropped mine when the kids graduated college. We still have some for hubby, but will drop when he retires in a few years. It is affordable, since we got through his professional organization. He also has some through work that is company paid.
When you have no dependents, have no debts that might create cash flow challenges for heirs, and are confident that anyone left in your household can manage without your contribution to household expenses.
I paid for term life when I had a mortgage, so my brother would not have to stretch his budget to pay the mortgage until the house sold. Two of my cousins share a household and carry small term life policies; their goal is to cover expenses during a transition period so the survivor can adjust budget, find a new roommate, or downsize.
A couple where one spouse has the unpaid work of full time childcare or elder care usually needs life insurance on the non working spouse. Paying for care is an expense that couple pays by having one spouse stay home, foregoing opportunities to earn income. Calculate the contribution to household expenses as the cost of paid care and obtain term life.
I bought a small ($5,000) life insurance policy back in 1968 when I was 19 and still have it. I realize that I don’t need it and never really did, I never married and have no children so there is nobody to protect.
I looked into cashing in the policy a few years ago. With the dividends going towards buying additional insurance over the years, the cash value had risen to over $25,000. Even after deducting a half century of premiums ($100/year), the extra income would have put me over the limit for some tax benefits. I finally decided to borrow about half of it with no intention of ever paying back. The annual dividends increase the cash value each year by more than the interest on the loan so the cash value will never reach zero, which would trigger the taxes. When I die, the loan amount will be deducted from the death benefit with no tax consequences. I may eventually borrow more.
If I had to do it over again, I likely wouldn’t have gotten the policy, or at least had gotten a term instead of a whole-life policy.
Yesterday I happened to run into the widow of the agent who sold me the policy, she’s a resident of the same assisted living facility as my brother. I wonder how much he made from selling me the policy.
My wife and I revisit this question annually now. Our boys are grown, but our oldest will need continued financial support all his life.
Our intent is to phase out our term insurance over 5 years or so, as the current amounts would allow the survivor to pay off the remaining mortgage and replace salary to age 60, at which point we expect to have plenty for retirement.
We also expect to shortly take out a 2nd to die policy for which our oldest will be the beneficiary. It will fund a trust uniquely for him when the last of us passes.
One factor that could come into play is whether the policy has a “Chronic Illness” benefit that could enable you to accelerate a portion of the death benefit to pay for Long Term Care expenses in old age. That could be a reason to keep the life policy when the “income protection need” has been met.
We dropped mine when the kids graduated college. We still have some for hubby, but will drop when he retires in a few years. It is affordable, since we got through his professional organization. He also has some through work that is company paid.
When you have no dependents, have no debts that might create cash flow challenges for heirs, and are confident that anyone left in your household can manage without your contribution to household expenses.
I paid for term life when I had a mortgage, so my brother would not have to stretch his budget to pay the mortgage until the house sold. Two of my cousins share a household and carry small term life policies; their goal is to cover expenses during a transition period so the survivor can adjust budget, find a new roommate, or downsize.
A couple where one spouse has the unpaid work of full time childcare or elder care usually needs life insurance on the non working spouse. Paying for care is an expense that couple pays by having one spouse stay home, foregoing opportunities to earn income. Calculate the contribution to household expenses as the cost of paid care and obtain term life.