Originally Posted by rayvt
Sounds like somebody bought the malarky from an insurance agent. <snip>
...so the overpaying has already been done.
I similarly continue to hold a whole life policy after about 20 years. At this point, the "malarky buying" and overpaying are in the past - water under the bridge and no longer a factor in deciding whether what I hold *now* is worth retaining, which is really what the OP is trying to decide.
The particulars on my policy are:
1) Current cash value is about $60K on $350K policy.
2) Annual rate of return in cash value of the policy (after subtracting premium for current period) has been running about 7.5%.
3) This year's net premium (guaranteed premium less dividends) is about $1200.
4) Net premiums have been declining (roughly) as originally illustrated and at current rate should zero out in about 10 years.
I continue to hold for several reasons:
Even if I were just looking at cash value, the policy is performing about as well or better than any other bond, CD or similar savings vehicle I can identify (again, at present - the past is gone).
Also, the $350K death benefit (I will die) can serve any of several functions:
1) Help to self-insure for extended care for me if needed (i.e. replenish kitty for DW should I predecease her and need some nursing home or similar home care on my way out), reducing the need to buy LTC or otherwise self-insure.
2) Provide some extra buffer (perhaps not really needed, but reassuring nevertheless) for DW if I predecease her.
3) Offset costs of estate taxes or otherwise provide greater transfer to heirs.
I realize I don't get to exercise all of the above, but any one will suffice.
Also, as I age, any trade off between cashing out early for my needs and awaiting my death for the greater benefit of others will be reduced, and as mentioned above, rate of return on cash value only is respectable. Should I live to 100, the point will be moot. ;-)
So at this point, it doesn't matter what the product is called. Nor does it matter if there are other ways to do these things - only if there are better ways to do them. For *now*, for me, and considering 1) the relatively low (and declining) annual cost, 2) the comparatively good and tax deferred return compared with other savings-like vehicles, and 3) the multiple scenarios in which the insurance proceeds could be of benefit (and the certainty that at least one of them will occur), I guess I'm still drinking the kool aid.