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Maintain a "Flex Premium Adj Life" ins policy?
Old 10-06-2015, 02:03 PM   #1
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Maintain a "Flex Premium Adj Life" ins policy?

When I was young and stupid (yes, I'm now old and stupid!), I was sold this insurance policy. I bought all the usual lines. I gained some smarts along the way, knew I didn't want to put any more $ into it, so I just let the premiums get paid from the policy balance. My records are sketchy, but I know I haven't paid a dime in many years, so I've been sort of thinking of it as a pre-paid policy.

It has now dwindled to zero (no surrender value), and is due to lapse. The original premiums were $404 for $100,000 face value. I am now 60 YO.

They want $181.03 to keep it in force, I just called, and he said the premiums would be $900 annual for the next year. Yes, they can be expected to increase, but he really could not share any info over the phone. He was going to mail me something that would show two years worth of premiums.

So on one hand, ~ $1,000/year for $100,000 coverage would be a 'deal' unless I live another 100 years (obviously way-over-simplifying for the time value of money and the premium increases). But even with the time value of the money, it would seem like good odds. So then it boils down to what the premium increases might be.

Anyone have any experience or insight into what premium increases might be expected?

True, I don't 'need' the insurance, but if keeping it in force makes good economic sense for my heirs, I should do it. But I don't really expect an insurance company to hand me any sort of a 'deal', so my gut says let it go. I could just consider the earlier payments I made like they were payments on a term life insurance policy, and that would have provided some value when I was the breadwinner. So just accept it, and be glad I paid for some protection that I ended up not needing?

Let it go? Or keep paying on it? Any input is appreciated.

C.M. Life Insurance company (Massachusetts Mutual Life Insurance Company), if that matters (I didn't check yet, I'm just assuming they are strong)

-ERD50
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Old 10-06-2015, 02:43 PM   #2
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Adding to my own thread as searched some more:

Universal life insurance: Life insurance that comes to a dead end - latimes

Quote:
Philip Mendel has been paying $25 a month for 23 years for a $100,000 policy but recently learned it will soon be worthless unless he bumps up his payments to $510. It's a case of not knowing what he was buying, one that has an important lesson for others.
$25*12=$300/year (I was paying $404/year for $100,000). Up to $510*12 = $6,120/year! He is 74 YO now, but still!

Looking very shaky.

-ERD50
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Old 10-06-2015, 04:02 PM   #3
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As you are guessing, premiums for this sort of thing ramp up like crazy as you get older. Unless you have much shorter than average life expectancy (dread disease), I would let it lapse.
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Old 10-06-2015, 07:11 PM   #4
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If this is a typical UL, once the cash value goes to zero, your premiums will look like you own annually renewable term. That means roughly exponential increases, just like a mortality table.

You should be able to get a schedule of current "monthly insurance charges" or some thing like that, for all ages. You should also be able to see explicit expense loads - probably percent of premium plus a flat per policy fee.

Of course, given the name, it may be an opaque adjustable whole life. In that case, ask for an in-force illustration.

If I didn't have a strong need for insurance, and I were in reasonable health, I'd drop it. The odds favor the house.
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Old 10-06-2015, 07:14 PM   #5
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+1

If you didn't have this policy and the history, would you be looking to obtain $100,000 of life insurance coverage? I suspect not since you said that you don't need the insurance coverage.

If you didn't have it and the history would you pay $1,000 a year for $100,000 of coverage to provide a bonus to your family if you should die?

I suspect that your probability of death is less than 1% so it seems to me to be a bad bet if you don't need the coverage.
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Old 10-06-2015, 07:40 PM   #6
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Thanks to all for the replies, it's confirming what I thought. And actually, after I typed it up, it seemed obvious - just drop it. Sometimes that's the advantage of having to commit your thoughts to paper/electrons. But I appreciate the responses, it really helps solidify it in my brain.

But I guess I still had a nagging thought, is this throwing good money after bad, or did my earlier payments actually buy me something worth keeping? But this comment specifically...


Quote:
Originally Posted by Independent View Post
If this is a typical UL, once the cash value goes to zero, your premiums will look like you own annually renewable term. That means roughly exponential increases, just like a mortality table. ...
Yep, that thought occurred to me as I was doing some mindless projects in the yard (beautiful fall day here in Northern IL). It just seems that mathematically, that's pretty much all it can be. And no, I would not purchase that product today.

Quote:
Originally Posted by pb4uski View Post
+1 ...
If you didn't have it and the history would you pay $1,000 a year for $100,000 of coverage to provide a bonus to your family if you should die? ...
Well, if it weren't for the premium increases, 1%/year would not be a bad deal for my heirs. So I might. But it seems very likely that the premium increases will just put me in the game of betting with an insurance company, and I'll pass on that bet.

And, it will simplify my life - one less thing to account for, for me, and my heirs.

-ERD50
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Old 10-07-2015, 02:37 AM   #7
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Cash value life insurance is the biggest racket. With so much information available on the Internet I don't know how anyone could ever fall for the trap of indexed universal life, variable life, or whole life.

And I keep hearing this Doug Andrew guy on the radio trying to convince people to pull equity out of their homes and even their 401K's to instead invest in indexed universal life. Just unbelievable. I feel sorry for these people who go to a 4 hour sales pitch at some local hotel and come out thinking they're gonna earn 8 or 9% when in reality they're probably gonna get about 2 - 5% and only if they hold the contract for life.
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