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Should I cash out a Variable Adjustable life insurance policy?

A little over 2 years ago, I was sold a $100,000 Variable Adjustable life insurance policy. At the time I didn't really know much about life insurance, but it sounded good at the time because of the cash value feature. I am 25 with no dependants, with an additional $25,000 whole life policy that my parents started for me long ago in addition to about $70,000 in group insurance through my employer. Now I am thinking that this VAL policy was not in my best interests considering my situation and am thinking about cashing out. I have paid in about $2500 in premiums and the cash value is about $1200. Is this a foolish thing to do at this point after paying so many fees thus far?

Public Comments

1. Yes, but surrender charges will apply. You probably will only get a few hundred dollars back or maybe nothing at all. In either case, at least you won't be paying $2500/year anymore. Cash value life insurance are never good way to build wealth for retirement. They don't even give enough death protection either since they are so expensive. A 23 year old paying $2500/year for just $100,000 coverage is ridiculous. I bought a 30 year term at age 23 with $150,000 coverage and only pay about $320/year on it. With $2500/year, I can get at least a $1 million coverage. While cash value grow tax-deferred, so does IRAs and 401ks and 403b. Did you know that cash value will never equal the face amount of the policy until you are well in your 90s? When the cash value does equal the face amount, the insurance company will pay the cash value to you and you will no longer be covered. If you were to die someday, you will lose all cash value. If you wanted to use the cash value, you have to borrow it. If you don't believe me, read your policy. What I suggest is cancel your policy. If you get any cash value from it, put it into a Roth IRA. If you get life insurance in the future, buy term instead.