# Cashing out whole life? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [March 23, 2014, 4:16pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365 "2014-03-23T16:16:07Z")\ **Posts on this page:** 18\ **Page:** 1
**Author:** ![ickywasp](https://avatars.discourse-cdn.com/v4/letter/i/49beb7/32.png) [@ickywasp](https://boards.straightdope.com/u/ickywasp)\ **Post date:** [March 23, 2014, 4:16pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/1 "2014-03-23T16:16:07Z")
My grandmother recently died and I learned she had purchased ME a whole life insurance policy when I was born. For the past 34 years, she had been paying the premiums ($15 a month) out of her personal bank account. Guaranteed Insurance Option: $10,000. Accidental Death Rider: $10,000 I recently contacted the insurance company and was surprised by how little cash value the policy had amassed: $625. Is this normal? I’ve read some less than positive reviews of whole life insurance, but this seems especially bad. She paid in over $6,120 in premiums since she bought it… Thanks Scott PS The current company is Jackson National Life Insurance, but they are just the latest in a long line of companies that have apparently have held this policy. ---
**Author:** ![GreenElf](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@GreenElf](https://boards.straightdope.com/u/GreenElf)\ **Post date:** [March 24, 2014, 1:01am UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/2 "2014-03-24T01:01:16Z")
For some reason, I thought this was either going to be a suicide thread or an early retirement move to Tahiti thread. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [March 24, 2014, 1:22am UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/3 "2014-03-24T01:22:39Z")
Yeah, it’ll happen that way. Whole Life - in some instances - is very slow to accumulate cash value. It’s just not what the policy can be designed for. Still, might as well let it ride. It’s not a ton of coverage nor a huge premium. But some coverage - if you need it - is better than none. Think about whether you might need it. Kids, spouse, something? That amount might be enough to cover final expenses (funeral and so forth) if that’s the sort of thing that concerns you. ---
**Author:** ![Melchior](https://avatars.discourse-cdn.com/v4/letter/m/e5b9ba/32.png) [@Melchior](https://boards.straightdope.com/u/Melchior)\ **Post date:** [March 24, 2014, 1:35am UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/4 "2014-03-24T01:35:14Z")
That seems low. It should be several thousand dollars, I think. ---
**Author:** ![Bill\_Door](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@Bill\_Door](https://boards.straightdope.com/u/Bill_Door)\ **Post date:** [March 24, 2014, 12:22pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/5 "2014-03-24T12:22:33Z")
> [@Jonathan\_Chance](#): > > Yeah, it’ll happen that way. > > Whole Life - in some instances - is very slow to accumulate cash value. It’s just not what the policy can be designed for. > > Still, might as well let it ride. It’s not a ton of coverage nor a huge premium. But some coverage - if you need it - is better than none. > > Think about whether you might need it. Kids, spouse, something? That amount might be enough to cover final expenses (funeral and so forth) if that’s the sort of thing that concerns you. A 34 year old non-smoker should be able to get around $150,000 of 20 year term life for the same $15 per month. Think about that before you let it ride, and think about how little cash value your whole life has accumulated. ---
**Author:** ![JerrySTL](https://avatars.discourse-cdn.com/v4/letter/j/e274bd/32.png) [@JerrySTL](https://boards.straightdope.com/u/JerrySTL)\ **Post date:** [March 24, 2014, 12:29pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/6 "2014-03-24T12:29:15Z")
My wife bought a horrible life insurance policy in the 70s. She’s been paying $50 a month and it has little cash value. Also she must cash it out at age 65. When she talked to an insurance agent for the company, he basically apologized about the crappy policy. So yes there were and probably still are some sub-par insurance policies out there. ---
**Author:** ![Bullitt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bullitt/32/5725_2.png) [@Bullitt](https://boards.straightdope.com/u/Bullitt)\ **Post date:** [March 24, 2014, 12:39pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/7 "2014-03-24T12:39:04Z")
I’m not too financially savvy, but if Scott ( **ickywasp** ) cashes out now, wouldn’t that be “buy high, sell low”? In other words, wrong? And Scott, welcome to The Dope. ---
**Author:** ![Bill\_Door](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@Bill\_Door](https://boards.straightdope.com/u/Bill_Door)\ **Post date:** [March 24, 2014, 12:58pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/8 "2014-03-24T12:58:35Z")
> [@Bullitt](#): > > I’m not too financially savvy, but if Scott ( **ickywasp** ) cashes out now, wouldn’t that be “buy high, sell low”? In other words, wrong? > And Scott, welcome to The Dope. I’ve never been able to make throwing good money after bad be a viable strategy, but maybe this time it’ll work. Just because stupidity got you into a fix doesn’t mean that stupidity can get you out, and purchasing whole life for a neonate qualifies as stupidity. Sorry about your grandmother **ickywasp** , but she got took. ---
**Author:** ![HipGnosis](https://avatars.discourse-cdn.com/v4/letter/h/76d3ee/32.png) [@HipGnosis](https://boards.straightdope.com/u/HipGnosis)\ **Post date:** [March 24, 2014, 3:21pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/9 "2014-03-24T15:21:44Z")
I heard on Clark Howard’s radio show that there is a service that will analyse your whole life policy and spell out your options and a recommendation on what is best to do with it. It is a fee-based service. > **[The CFA’s Rate of Return (ROR) Program | Evaluate Life Insurance](https://evaluatelifeinsurance.org/)** > > Our Rate of Return program estimates investment returns earned on whole, universal, indexed universal, and variable universal life insurance policies. ---
**Author:** ![TimeWinder](https://avatars.discourse-cdn.com/v4/letter/t/bcef8e/32.png) [@TimeWinder](https://boards.straightdope.com/u/TimeWinder)\ **Post date:** [March 24, 2014, 4:24pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/10 "2014-03-24T16:24:24Z")
> [@Bullitt](#): > > I’m not too financially savvy, but if Scott ( **ickywasp** ) cashes out now, wouldn’t that be “buy high, sell low”? In other words, wrong? Not if it’s never going to get any better, and if that policy hasn’t even accumulated $1000 after almost 35 years, it’s not going to get better. There aren’t many cases where a whole life policy is better than a term one; generally those cases are where the WL policy is a good investment. This one isn’t. Consider that over a normal lifespan, he’ll pay more into this policy than (his heirs) will get when he dies – there’s no investment gain _at all_. In other words, the policy is actually worth less than just sticking that money in a cookie jar. Even for a whole life policy, that’s beyond terrible. My wife was saddled with one of these monstrosities, too. Cashed it out and turned it into a much cheaper term policy, and in so doing ended up with much better protection for a lot less money. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [March 24, 2014, 5:13pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/11 "2014-03-24T17:13:00Z")
> [@HipGnosis](#): > > I heard on Clark Howard’s radio show that there is a service that will analyse your whole life policy and spell out your options and a recommendation on what is best to do with it. > It is a fee-based service. > [http://www.evaluatelifeinsurance.org/](http://www.evaluatelifeinsurance.org/) Any broker will do that for free. And the existing policy may be able to be 1035 exchanged into a better one. Bill is right that better options are out there. I hadn’t noted your age prior to my previous post, but if you’re 34 and in good health you should be able to get a decent policy pretty cheaply. ---
**Author:** ![Learjeff](https://avatars.discourse-cdn.com/v4/letter/l/94ad74/32.png) [@Learjeff](https://boards.straightdope.com/u/Learjeff)\ **Post date:** [March 24, 2014, 8:18pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/12 "2014-03-24T20:18:55Z")
> [@JerrySTL](#): > > So yes there were and probably still are some sub-par insurance policies out there. Some? There are lots of them; just answer any TV insurance ad to find one! > [@Bullitt](#): > > I’m not too financially savvy, but if Scott ( **ickywasp** ) cashes out now, wouldn’t that be “buy high, sell low”? In other words, wrong? No, he’d be getting something for nothing, which is the best ROI possible. Might not be the best plan though, so best to talk to a broker. It used to be (back in the late 80’s, early 90’s) the general rule was, get the cost for whole life, but buy term and invest the difference, until you’re 40, then get whole. You’ll be much farther ahead. I skipped the second step, simply because my employer allows me to buy term at a very low rate, and by the time I retire I won’t need life insurance. The flaw here is if I lose my employment and don’t get re-hired. Fingers crossed. ---
**Author:** ![Melchior](https://avatars.discourse-cdn.com/v4/letter/m/e5b9ba/32.png) [@Melchior](https://boards.straightdope.com/u/Melchior)\ **Post date:** [March 24, 2014, 9:21pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/13 "2014-03-24T21:21:14Z")
It also depends on how the dividend options for the policy were set up. If it has ‘dividends to additions’ the death benefit keeps increasing rather rapidly. Don’t assume it’s a ‘bad’ policy. Dividends can also be used to pay premiums or as cash value or as cash paid out. ---
**Author:** ![Melchior](https://avatars.discourse-cdn.com/v4/letter/m/e5b9ba/32.png) [@Melchior](https://boards.straightdope.com/u/Melchior)\ **Post date:** [March 24, 2014, 9:37pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/14 "2014-03-24T21:37:23Z")
This explains: [http://retirementandinsurance.blogspot.com/p/whole-life-insurance-dividend-options.html](http://retirementandinsurance.blogspot.com/p/whole-life-insurance-dividend-options.html) ---
**Author:** ![RickG](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/rickg/32/5174_2.png) [@RickG](https://boards.straightdope.com/u/RickG)\ **Post date:** [March 24, 2014, 9:51pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/15 "2014-03-24T21:51:01Z")
> [@Learjeff](#): > > I skipped the second step, simply because my employer allows me to buy term at a very low rate, and by the time I retire I won’t need life insurance. The flaw here is if I lose my employment and don’t get re-hired. Fingers crossed. My employer provides 2x salary (up to $150K) for free. To get to a necessary amount of coverage (for the 6.5 years until both kids are done with college!), I buy term life through a professional society (IEEE). The group rates are pretty decent: about $70/month buys me and my wife $500K coverage each (that includes the annual membership in the society, which is required to get the insurance). We’re both 50ish. Lots of membership organizations provide good term life deals, and protect you from losing coverage in the event of job loss. (If I could get away from employer-based health insurance, I’d do that, too.) ---
**Author:** ![Melchior](https://avatars.discourse-cdn.com/v4/letter/m/e5b9ba/32.png) [@Melchior](https://boards.straightdope.com/u/Melchior)\ **Post date:** [March 24, 2014, 10:07pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/16 "2014-03-24T22:07:53Z")
The problem with term life insurance is that it is usually dropped late in life because he premiums increase so much, and the money paid is gone. Whole life costs more because part of the premium is used to purchase permanent insurance coverage which is more likely to be paid out. Term is good if you are young and need a lot of coverage, but you should still have \*some \*whole life regardless. Many newer whole life policies have investment-grade quality with the tax advantages over pure investments. ---
**Author:** ![Melchior](https://avatars.discourse-cdn.com/v4/letter/m/e5b9ba/32.png) [@Melchior](https://boards.straightdope.com/u/Melchior)\ **Post date:** [March 24, 2014, 10:13pm UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/17 "2014-03-24T22:13:26Z")
Here’s what I mean: [http://en.wikipedia.org/wiki/Variable\_universal\_life\_insurance](http://en.wikipedia.org/wiki/Variable_universal_life_insurance) ---
**Author:** ![handsomeharry](https://avatars.discourse-cdn.com/v4/letter/h/e9c0ed/32.png) [@handsomeharry](https://boards.straightdope.com/u/handsomeharry)\ **Post date:** [March 25, 2014, 5:08am UTC](https://boards.straightdope.com/t/cashing-out-whole-life/684365/18 "2014-03-25T05:08:52Z")
> [@ickywasp](#): > > My grandmother recently died and I learned she had purchased ME a whole life insurance policy when I was born. For the past 34 years, she had been paying the premiums ($15 a month) out of her personal bank account. > Guaranteed Insurance Option: $10,000. Accidental Death Rider: $10,000 > > I recently contacted the insurance company and was surprised by how little cash value the policy had amassed: $625. > > Is this normal? I’ve read some less than positive reviews of whole life insurance, but this seems especially bad. She paid in over $6,120 in premiums since she bought it… > > Thanks > Scott > > PS The current company is Jackson National Life Insurance, but they are just the latest in a long line of companies that have apparently have held this policy. That seems to be a high premium, and a low cash value, but, some insurance policies are designed that way. Whole life is one big ripoff, but, if insurance is needed, and there is nothing else available, it beats nothing. In this case, I would say that if you are insurable, you should cash this out, and, if you want insurance, buy from somewhere else. (Don’t cancel it until you already have a replacement policy.) Contact Americorps(?? Formerly, _AL Williams_) and they will give you a free evaluation and can let you know how you can use your money to your advantage, insurance wise. Ask them to explain the phrase “Buy term and invest the difference.” I worked as a Whole life salesman, and, as a replacement agent in the 80s.