For you insurance type or that have experience.

I bought a whole life ins. policy years ago. Yes I know about all the terrible aspects of a whole life policy. But did not back then. And it has not been the worst thing I ever did. It did allow for a vehicle to save money (actual cash value) while providing a benefit if and when I die to my spouse. It did also grow some over the years. Albeit probably a fraction of what it might of been if I invested it well. But the death benefit was there in case was need on the other hand.

Any way am approaching a couple decades with the policy. I am still kicking. There is a chunk or of cash value in the policy now.

We are considering buy a place and could use the funds. I am trying to understand the specifics and ramifications of using it.

As I understand it I can cash out the policy. Get all the monies (premiums) we paid over the life of the policy. No taxes, our money. They the profits that we received on the premiums would also be ares but would have to pay taxes on that portion. Obviously all aspects of the policy would come to an end at that point.

Another option is to borrow cash on the cash value of the policy which would keep the policy in affect. But would extend to policy premium indefinitely for all intended purposes. We currently are at the point with the policy where it investment return on premiums is making the premium payments now.
I am not real clear on how the borrowing thing works and am leary about it.

Maybe some of you can explain or advise whether any of this makes sense or whether there is another avenue to explore.

Thanks guys and gals. Sincerely, orc

Read the loan documents carefully, but generally speaking, the loan is a simple loan against the cash value of the policy.

You will make regular loan payments (including interest) and in the event that you get hit by a bus prior to paying the money back, the remaining balance just gets deducted from the policy proceeds.

If you're inclined to keep the policy and as long as you're dealing with a reputable company, borrow with confidence.

-Rob

Thank you BRW,

The loan with interest is the part that is bit confusing. Isn't it my money I am taking (borrowing)?
If I am pulling money out. I understand I need to put it back to keep the policy in affect. But why the interest?

Can't I just take a portion of the cash value out and keep paying premiums to keep the policy in tact?

http://www.kiplinger.com/artic...-life-insurance.html

Here's one article on the matter, Forbes may have another with helpful info. I'm thinking individual details can vary, at least it's a few things to think about.

I would say turn it in a pick up term life, but the age factor may make that expensive. On the other hand, the issuing company may give you a fair rate to keep your business. If you have ever had any type of government employment, check out WAEPA, in Falls Church, VA. They issue term policies like a credit union, on a non-profit basis.

The insurance company is making money on the cash value. If you take the cash, they make less money. To offset this they charge interest on the loan and keep the policy in force.

Thanks Trapper. Understood.

What's the cash value of the policy relative to the face value? Is the cash value 100% of the face value or less like 80% or more like 120%?

Whether you surrender the policy or borrow against the policy would depend on several things. Do you still need the insurance protection? Like for example, I needed life insurance to tide my wife over should I die and the income I bring in. I have enough retirement savings now that I don't need the coverage as she will be covered by the money we saved. If you don't need the insurance protection, then you can surrender it.

If you still need the insurance protection, then you can either borrow against the policy or surrender it and buy another insurance. But if you buy another insurance - whether term or another whole life or universal life - your premiums are going to be significantly higher. Since you have a cash value, I'm going to assume the new premiums are exponentially higher for the same amount of policy value. Another consideration is are you still insurable? Things happen to our health which may increase your costs or even exclude you from being underwritten. You need to consider that to or make sure of.

If you borrow against the policy, you have to pay interest because the interest on the cash value has been helping to keep your premiums the same over the years. Inside the policy, the actual cost for your insurance has been increasing. At the beginning, your premiums were higher than the actual costs to insure your life. The difference were accumulating into your cash value. Over the early part of the policy, the cash value kept increasing by the difference between the premiums you were paying over the actual insurance costs plus the interests earned by the cash value. At some point, the actual costs to insure you are more than the premiums you are paying but the interests being earned by the cash value go into paying the difference between the higher insurance costs and your premium payments.

If you borrow against the cash value, there is less cash now to earn interest to help offset the insurance costs and to meet the guaranteed cash value schedule of your contract. Hence, you have to pay interest so that your cash value will still continue to increase.

Thanks guys, that helped clear up a few aspects of my thought process about this. I really appreciate it, as always. Now go have a great day