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Question Regarding Whole Life Terms

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  • Question Regarding Whole Life Terms

    My wife and I (physician and airline pilot respectively) made the mistake of purchasing whole life insurance at MassMutual back in 2010.  In hindsight, we now realize this was a mistake.  Nevertheless, we are now exactly 9 years into this mistake and are now wondering if we are past the "point of no return" and whether we should just keep the policy (and paying the premiums) or cash out.  A little background...

    We have 4 children ranging in age from 2 to 11.

    Both of us also have term life insurance policies (3.75M each)

    The whole life policies we purchased were $250,000 each with monthly premiums of ~$275 for me and ~$197 for my wife.  The website says the current "cash value" for my policy = $26,126 and my wife's "cash value" = $18,895.  The current "Paid Up Additions Available to Withdraw" = $2,673.81 for my policy and $3641 for my wife's.

    So a couple of questions:

    1. I am confused as to what the current "paid up additions available to withdraw" term means as opposed to "cash value".  If we were to terminate the policy now, what are we left with?

    2. We don't have any unusual estate requirements that would necessitate a death benefit (beyond protecting our kids -- which the term policies accomplish).  That being the case, and given that we are 9 years into the policy and estimating that the annual dividends would be able to cover the premiums in another ~9 years, do we keep going and paying the premiums or terminate the policies?

    Thanks so much for any help / advice!

     

    Best,

    Pilot & Doc

  • #2
    Go back to the website and look up 'Net Surrender Value', that will tell you exactly how much you will get back if you surrendered the policies.

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    • #3
      https://www.whitecoatinvestor.com/how-to-evaluate-your-own-whole-life-policy/

      https://www.whitecoatinvestor.com/how-to-dump-your-whole-life-policy/
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #4
        1. It's a little confusing. Agree an inforce illustration showing your surrender value is what you really want to look at.

        2. See the links above, but if you're like most, you don't want to have this thing hanging around for decades reminding you of your mistake once a year when you wonder if you should dump it. But the return going forward will be better than what it was in the past (negative). It's probably 4-6% going forward from here and maybe by year 15 you will even break even.
        Helping those who wear the white coat get a fair shake on Wall Street since 2011

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        • #5


          The whole life policies we purchased were $250,000 each with monthly premiums of ~$275 for me and ~$197 for my wife. The website says the current “cash value” for my policy = $26,126 and my wife’s “cash value” = $18,895. The current “Paid Up Additions Available to Withdraw” = $2,673.81 for my policy and $3641 for my wife’s.
          Click to expand...


          If today I called you and offered you two options:

          1. $250k in life insurance and you pay me $5,664/year for it (the most expensive insurance ever) or........

          2. I would give you ~$45,000 in cash and you could keep your $5,664 a year forever and ever......


          which one would you chose?

          The previous money spent is sunk cost. You cannot get that back just like you cannot get back any money you spent for food or gas over the past 9 years yet it still pulls on you (and everyone else who bought these policies) because it was promised as an investment.

          I would want option #2. Why complicate your life any harder trying to coax 4-6% returns out of it for the next 15 years to 'feel' like you broke even? You still lost when factoring in lost purchasing power and missed opportunity cost.

          Good luck making your decision. I understand that there is an emotional aspect to it but I would take the money and leave Mass Mutual forever and ever.

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