All Life Insurance Tips

I'm debating on if I should keep my variable universal life insurance policy?

I'm 31 years old, and I pay $100 a month for a $250,000 death benefit payout.

Public Comments

1. Without knowing a heck of a lot more, it's hard to say. However, let's look at what you've got right now. I'm going to assume that the amount you pay and that your coverage are actually suitable for you in your present circumstances. You're covered for your entire life with insurance, even if you develop a heart condition, etc., later on in life. For those who are going to come here and scream at you to "buy term and invest the difference" -- that's exactly what you ARE doing, only you're doing it within a tax advantage product. A lot of the folks who badmouth VUL's aren't even licensed to discuss them so a lot of what they say is actually "sour grapes". You're in a product that allows you to grow money tax deferred AND to take it out tax free before 59 1/2; you can't do that in mutual funds (capital gains are taxed there); you can't do that in a ROTH (growth can only be touched after 59 1/2). There are also lower limits to what you can put in per year in a ROTH. Without knowing the make-up of your policy (whether it's all base, blended, etc., your own rating by the company; the company's fees, it's impossible to give accurate numbers but here's one rough scenario that I ran with a particular company. Assuming you're mid range (say just a standard rating non-smoker, and assuming your policy is blended well, then if you put in $100/month till you're 65 (from your present age), you'll put about $42,000 into your policy. Again assuming only a 10% growth rate in the subaccounts, and assuming that you choose to withdraw from the policy from age 66 to age 80, you can pull (in this particular company's illustration) $15,465 a year tax free for a total of about $231,000 and if you died in age 80, your heirs would still get a death benefit of about $22K. A lot of folks here are going to scream and tell you that you should never put money into cash value insurance. They're mostly yelling about Whole Life and/or Universal Life, where they actually have a point. However, when they tell you to simply put your money into naked mutual funds, they neglect to factor in the cost of taxes at the far side and what that will do to the amount you will be able to pull and live on. If the fact that Variable life is out in the market concerns you, you might also consider looking at some of the Equity indexed Universal life products on the market now. A good number of them guarantee you a floor (often about 1 or 2%) and allow you a cap of of about 12% or more, with a lot seeming to average about 8% or so over time. It's a bit of a heavy read, but you might want to check the library for Ben Baldwin's, "New Life Insurance Investment Advisor." (None of what I've mentioned above is in any way to be construed as a solicitation for anything. It's provided only for your information and in answer to your question.)
2. Well, if you don't get rid of it soon, the cost to have it will be very expensive in the future. If you take a look at the policy, you will see that the cost of insurance goes up every year and less and less of your premiums goes toward cash value. Eventually, you will have to pay more premiums if you want your cash value to grow. What I would do is get a 30 year term insurance. For $250k coverage, it may cost you about $30/month! But I don't know if $250k is enough for your family to live on in case you die. Only an agent can find that out. If you invest the difference of $70/month in a mutual fund at a 12% rate of return, in 30 years you can potentially have about $247,000! If you open an IRA account, all this money grows tax-deferred.
3. What's the PURPOSE? What's the GOAL? If the purpose/goal is the death benefit, there are smarter, cheaper ways to do it. At your age, you can get $250,000 of term for about $175 A YEAR.
4. well pigeon whatever he is forgot to tell u that that $42000.00 in that policy is not yours..sure it shows growth, but the company keeps that money when you die. these whole life guys are blowing smoke...and most of the consumers are not told the truth. what a deal huh? nice tax-free investment? what a bunch of smoke