My folks set this up when I was born (1977). It’s not a huge policy, but I was thinking about cashing it out. It’s a term life policy.
With another baby on the way and struggling to make ends meet, cashing out the policy would allow us to catch up on bills, pay the health insurance deductible for the delivery, and put a little extra in the bank.
What are the penalties for cashing out early? I recently learned of the policy and personally, I’ve only been paying on it for a few years.
I know it’s recommended to have a policy in case something happens, but cashing out will have an immediate impact on my family and the money will be put to good use.
Plus, I’ve heard that term policies are better and once we’re caught up and back on track, I’d get a term policy.
Is this plan reasonable? Are there too many penalties? Just looking for some advice from those in the industry.
Susie T 3:02 pm on August 19, 2010
If you’re having another baby and feel you can’t afford to pay the insurance premiums, what would your family do for income if you were to die and had cancelled the policy? Sounds like they would be in trouble. you can have the face amount reduced if you can’t pay the premiums. But term insurance is the cheapest insurance you can buy, and as a father, you need to have enough to support your family if anything happened to you.
If it’s whole life, you can BORROW out the cash surrender value and still have some life insurance in case of need. don’t you have access to term insurance through your employer? That’s probably cheaper and you could buy a larger amount for the same premium.
Every family should have at least $500,000-1 million of term insurance on the breadwinner. It’s cheaper than losing your house if you die and your family can’t afford the mortgage and living expenses any more. Good luck!
jlf 3:02 pm on August 19, 2010
There is nothing to "cash out" on a term policy. Or do you mean a whole life policy.
mbrcatz 3:02 pm on August 19, 2010
Term life doesn’t have cash value. Period.
If it’s NOT term, then you need to call them and ask what the cash value is, and the surrender value (what you can get if you cancel the policy).