Little note in the fine print at the bottom of my premium notice:

"This policy is scheduled to expire without value at age 83 before it's maturity date of 2051"

So the 40-odd years I've been paying into it is a complete waste of money since I didn't die.

Barring an accident, I expect to live to AT LEAST 83, and I'll be cashing it in for it's piddly cash value so I'll at least see some benefit from it.

Yes, I know it was to protect my family when I was younger just in case. Still pisses me off.

I'm not understanding, Paul. Did you purchase term life so expires "without value"? Or something else that can be cashed in for "piddly value"?

quote:

Originally posted by ridewv:
I'm not understanding, Paul. Did you purchase term life so expires "without value"? Or something else that can be cashed in for "piddly value"?

"Flexible Premium Adjustable Life Insurance" through Trivent, which was AAL (Aid Association for Lutherans). Hey, insurance from a religious organization, you can trust them right?

Reading further into the fine print it is "estimated" to terminate at age 83, unless I increase my fixed automatic premium of $1200/yr. I'll wait a few more years for the cash value to build up and then cancel it. I have enough tucked away to cover my "final expenses".

Edit: I mis-read "Estimated" as "Scheduled" on my first reading.

I'd guess that its a form of whole life insurance. Term life doesn't have a cash value....

Yes it must be, although my whole life policies have grown to a pretty nice value now. In fact I should cash them in.

We had Universal life which is essentially whole life. When I cashed it in there were various fees and adjustments which resulted in paying out only about half the stated cash value!

Cash value seems to be something much different than one would think it is.

I had whole life for about 3 years when we were young, then cashed it out in favor of term life. It will cost more than it's worth in 3 more years, but my estate should support my wife very well.

Former agent here. "Flexible Premium Adjustable Life Insurance" is a hybrid plan that combines features of term life and cash value policies like whole life or universal life. It's designed to be more flexible in terms of premiums and coverage amount.

Term life has much lower premiums, but the tradeoff is not having cash value. You are paying solely for the insurance coverage, much like auto insurance, which normally does not pay out unless you actually have an accident. It's best used for time-limited coverage.

Cash value policies use some kind of investment to help pay for the higher premiums. It's generally considered a form of permanent insurance, and does have inherent cash value if you do live a long time.

Adjustable life is between these plans. It does build a cash value of some kind, but is intentionally designed to "fizzle out" at a certain age. This keeps premiums down, but still provide for longer coverage.

Basically if you want larger, permanent cash value, you also have to accept significantly larger premiums. As you already understand, you can actually do this with your current policy by increasing the monthly payment, but you have to decide if that would be fiscally efficient for you.

No-one is necessarily ripping you off. With life insurance, as for most things, you can't get something for nothing.

This message has been edited. Last edited by: kkina,

quote:

No-one is necessarily ripping you off. With life insurance, as for most things, you can't get something for nothing.

Yeah, not a scam IMO but as with anything, read the details and make an informed decision.
Decide if it is of value to you or not.

quote:

Originally posted by kkina:
Basically if you want larger, permanent cash value, you also have to accept significantly larger premiums.

If you're considering a whole life plan, understand that in basically every situation you'd be better off getting an inexpensive term life insurance plan, and then "pay" that significantly larger premium you would have been charged for whole life to yourself for investment (or to pay off the house early, or similar).

You'll end up with a much better return than the cash value of a whole life policy, which typically only returns about 1-2%.

In addition, the accrued cash value of the whole life policy goes to the insurance company upon your death, not to your beneficiaries... Your family only gets the standard death benefit payout of the insurance policy, just like a term life policy.

So say you managed to accrue a $300k cash value on a $500k whole life policy. When you die, your family gets a $500k payout, not $800k. The insurance company effectively only has to pay out an extra $200k from their pockets over the $300k they get back from your cash value.

Whereas the well over $300k you've managed to accrue in investments from effectively paying yourself that extra premium over all those years would go to your beneficiaries, in addition to your $500k term life death benefit.

So like smschulz said, while it's not quite a scam... Cash value insurance policies are just not usually a smart choice.

Premiums plus costs equal face value on whole life if you live to be 100, at which point they pay you the face value if you are still alive. 105 on some policies now. You only “gain” if you die early.

Keeping life insurance in perspective:

Life insurance provides a way to artificially create an estate (provide for family needs, final expenses, etc) while still working to create your estate in reality. We pay premiums in expectation that the policy will take care of anticipated needs while we go about the business of life.

Once a person has achieved a position in life where savings and investments are sufficient to meet the needs there is a reduced incentive to carry life insurance. The person's estate is established, so there remains little or no need to pay for the policies.

When compared to traditional investments such as real estate, stocks, bonds, savings accounts, etc, life insurance is generally a very poor investment vehicle (in terms of return on investment). A policy can serve legitimate needs for many people, but cannot be seriously compared to the more traditional methods of wealth creation or capital growth.

A life insurance policy is a contract; you agree to do certain things (like paying premiums on time) and the company agrees to do certain things (like showing up with a check for your beneficiaries). Expecting more than the policy terms specify is unrealistic.

All good points. Two take-aways from this discussion:

1. I should have read the fine print and gotten a thorough understanding of the way life insurance works vs. being dazzled by the numbers.

2. I need to evaluate my current circumstances and decide whether to continue paying premiums or cash in the policy now.

I'm on the fence about this. I'm 73, the policy is $50k flat benefit and the premiums are $100/month. Cash value is ~$6K before taxes.

If I pass before my spouse, the sale of real estate and toys (she plans to move into elderly housing in town if that happens) would set her up for the remainder of her life.

I think I had been paying about $35 a month for a 300,000 dollar policy and then I turned 55 and got a letter from the insurance company that they were more than happy to extend the policy to the age of 92 and the monthly premium was just going up to $250 a month.

I am 61 and pay $100 a month for a $500,000 term life policy. It increased a few times upon renewal as I aged and with medical issues.

At 67, it will increase dramatically and I will probably cancel the policy.

The policy was originally a $1,000,000 policy but as my estate increased in value and the premiums increased, I lowered it to $750,000 then $500,000.

My wife is 3 years younger with no health issues. Her $500,000 policy, with the same carrier, costs us less than half mine.

The purpose of life insurance is to provide $ for people who depend on you. With a few exceptions, it is hard to see a need after about age 55. Cheap term is seemingly the best way to hedge against an early death.

quote:

Originally posted by Fly-Sig:
We had Universal life which is essentially whole life. When I cashed it in there were various fees and adjustments which resulted in paying out only about half the stated cash value!

Cash value seems to be something much different than one would think it is.

That does seem low. Was it half the cash value or half the coverage amount (i.e. face value)?

quote:

Originally posted by PHPaul:

2. I need to evaluate my current circumstances and decide whether to continue paying premiums or cash in the policy now.

I read that you need to look at life insurance as income replacement protection.

For example, as a young husband with a stay-at-wife and four kids, a mortgage, and college loans, I needed a relatively large (term) policy to replace the "lost" income if I died. After 10 years, having paid off my college loans and building our retirement and savings accounts, I dropped the first policy and got another term policy with lower coverage and a smaller premium. After I got into my 50s, when we were empty nesters and had built up enough savings to pay off the mortgage and provide for my wife, I dropped the policy entirely.

^You did it exactly right.

RE: CoolRich and kkiina above

So, I'm 73, all my income is in the form of pensions, I have no debt beyond a car payment and no mortgage.

Sounds to me like I should cut my losses and cancel my policy, take whatever I can get in the way of cash value and save/invest the $100/month premiums.

Is that about right?