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Life insurance: take cash or continue coverage
Old 10-15-2021, 10:24 AM   #1
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Life insurance: take cash or continue coverage

I retired from MC six years ago at age 56. Part of compensation was a 750k life insurance policy. The company continued to pay the premiums (about 20k a year) until age 62. Naturally, I left it in place as long as it didn't cost me anything (I did have to pay taxes on the premium, alas, but I'm now recovering that).
I will be turning 62 shortly and MC will stop paying premiums. The insurance company is providing several options:
1. Cash out (value 140k)
2. Continue coverage and use cash value to pay premiums. Once that cash runs out, the policy terminates. Based on different rates of return, this could be anywhere between age 72 and 100
3. I can pay annual premiums and policy will last longer, of course.

To me, the purpose of life insurance is to provide for those left behind. Because I'm FIREd, I obviously believe DW and I have enough for the rest of our lives, so if I die, she will DEFINITELY have enough (since she doesn't have to maintain ME anymore...). Therefore, I intend to cash out "on principle". However, does anyone here see a financial reason to maintain the policy or even pay the premiums? Just curious how others think about this.
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Old 10-15-2021, 10:34 AM   #2
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$20k is a chunk of change so I wouldn't choose 2 or 3.

Option 1 would be my choice.
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Old 10-15-2021, 10:37 AM   #3
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Originally Posted by euro View Post
I retired from MC six years ago at age 56. Part of compensation was a 750k life insurance policy. The company continued to pay the premiums (about 20k a year) until age 62. Naturally, I left it in place as long as it didn't cost me anything (I did have to pay taxes on the premium, alas, but I'm now recovering that).
I will be turning 62 shortly and MC will stop paying premiums. The insurance company is providing several options:
1. Cash out (value 140k)
2. Continue coverage and use cash value to pay premiums. Once that cash runs out, the policy terminates. Based on different rates of return, this could be anywhere between age 72 and 100
3. I can pay annual premiums and policy will last longer, of course.

To me, the purpose of life insurance is to provide for those left behind. Because I'm FIREd, I obviously believe DW and I have enough for the rest of our lives, so if I die, she will DEFINITELY have enough (since she doesn't have to maintain ME anymore...). Therefore, I intend to cash out "on principle". However, does anyone here see a financial reason to maintain the policy or even pay the premiums? Just curious how others think about this.
Well based on your parameters I would cash out. obviously just my $.02 worth
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Old 10-15-2021, 10:41 AM   #4
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Easy - cash out. We stopped buying life insurance as soon as we had enough to retire.
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Old 10-15-2021, 10:42 AM   #5
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Yes, take the money. Why have insurance if you have nobody to protect. People need life insurance for children. Children grown and employed? Wife protected by assets?

No insurance needed.
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Old 10-15-2021, 10:49 AM   #6
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Cash out is the right choice. It's $140k on top of your already sufficient nest egg.

If you want to continue with life insurance, you can buy a $750k 10 or 15 year term policy for a 62 year old today for $200-$300/month - significantly less than the $20k.
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Old 10-15-2021, 11:05 AM   #7
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Yes, take the money. Why have insurance if you have nobody to protect. People need life insurance for children. Children grown and employed? Wife protected by assets?

No insurance needed.
+1
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Old 10-15-2021, 12:25 PM   #8
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I say take the cash out , just don't tell your Wife, or she might do math and realized quick action nets $750K
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Old 10-15-2021, 02:37 PM   #9
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I say take the cash out , just don't tell your Wife, or she might do math and realized quick action nets $750K




Thanks everyone for your input! Just for the sake of completeness, option 3 where I pay premiums would be limited to 10 years (total premium of 200k), then no more premiums to age 100.
In any event, I'll cash it out and study what to do with the dough... maybe I'll just blow it somehow
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Old 10-15-2021, 04:44 PM   #10
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Well, that makes the math more interesting. Option 3 may be a viable option.
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Old 10-15-2021, 05:05 PM   #11
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Well, that makes the math more interesting. Option 3 may be a viable option.

Yes, I'm thinking, I could pay you the $140k, start making $20k premium payments-- How much time did you say you have left, I missed that part.
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Old 10-15-2021, 05:10 PM   #12
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Time2, I don't think that is an option. He takes the $140k payout or pays $200k over 10 years (until age 72) for $750k death benefit for a lifetime.

I wonder if the policy has the option of LTC $ draw-down. Time to read a copy of the policy.

In 22 years half of the men currently 62 will have passed.
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Old 10-15-2021, 05:33 PM   #13
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The only time I would keep that kind of policy is if my doctors said I only had a few years to live.

Otherwise I'd cash out and either reinvest the money elsewhere, or take the spouse on a nice trip as thanks for not offing me for the dough.
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Old 10-15-2021, 09:40 PM   #14
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Not trying to hijack this thread but perhaps this might apply to OP as well. I have life insurance and want to find the best approach to give it to DD & DS now. We have received advice to make them the owners of our policies. I assume at that point, DD/DS could cash it in or wait for the final payout. The cash value is not bad.

Has anyone done that? Do you know the up/downside? Thanks


Thanks
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Old 10-15-2021, 09:47 PM   #15
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If you cash out what are the tax implications, if any? If you pay premiums, what would cash value grow to after 20 years of premium payments?

If this is an old contract it might have a very attractive guaranteed minimum interest rate that you can take advantage of as use for part of your fixed iincome portfolio.

I have an old whole life policy that I am still paying premiums on because the cash value is growing at a rate better than I can find in any bonds.
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