<p>This is my very 1st post as a new member, but I have been following the Parent’s thread regarding college issues. It may turn out to be a long thread, but please bear with me.</p>
<p>My father took out a whole life insurance policy when he was 62 (big mistake in my opinion). He has been paying premium for over 20 years!!! What he has put in over the years is now more than the face value of the policy. Does it make sense to anyone?</p>
<p>The reason he bought the policy was for the dividend income (according to him). The annual dividend payout is much less than the annual premium amount. Supposedly the dividend will purchase additional insurance. But judging by the anniversary statement, does not look that great. </p>
<p>Does not matter which way you look at it, it is a losing proposition. My father is extremely stubborn and won’t listen to me. I called the insurance company a couple of times, they won’t talk to me since it is my father’s policy. My father has to call them directly, but he won’t. He now lives outside of the country, but he can still call the 800 number, but he won’t! Because he still thinks that this life insurance policy is the best thing ever!</p>
<p>After years of frustration, I was so tempted to give up. I said what the heck, it is his money! But then I feel so bad that he is basically throwing his money away, while he lives such a frugal life, watching every dollar and cent he spends. Does it make sense to you guys?</p>
<p>So my question is : Is there an end to the annual premium for a whole life policy? Can someone on CC who is an insurance expert help me out with some answers. Also, if my father refuse to call them for information, is there anything I can do to help?</p>
<p>I have gained so much knowledge on college stuff over the last 3 years on CC, my son is a junior in college. Now I really need your help on this insurance issue. It has been bothering me for quite some time.</p>
<p>Whole Life policies can be paid up at age 65, 70, 75 or later depending on the type of policy. Ask your father to open up the policy and see if it says Life Paid Up At Age___. </p>
<p>Keep in mind that back in 1990 interest rates were higher and Life Insurance agents boasted at how high dividends would be in the later years. They might have given him a printout showing him his anticipated dividends and at what year the dividend would exceed the premium. As we all know now, interest rates did not stay at 10% or 12% so those printouts turned out to be wrong. </p>
<p>If he does not need to use his dividends to purchase him extra insurance then he can change his dividend option each year to Reduce Annual Premium. I think they would let you call to request the change in dividend option form be mailed to him to sign. If he cannot afford to pay the insurance premium then he can call them to request premiums be taken from his dividends. Are you his beneficiary?</p>
<p>sounds like he doesn’t need the money from the cash value?
Premiums at 60 although high, is cheaper than what they are at 80.
Rate-of-return (interest) is probably very good now and will get better.
Return of Premium (aka dividends) may be fairly small since insurance companies may be in a cash bind. </p>
<p>Do you need the insurance proceeds?
Purchasing life insurance is for the normally for heirs and handling final expenses.</p>
<p>Feel free to PM my any specific questions, I work in an insurance office. We have some clients from the 80s who currently are enjoying a minimum of 6% return on their cash value. Not bad, though that is not the reason they bought; these were people who retired and used lump sum funding of UL for retirement plans and estate taxes, etc.</p>
<p>We have not had any clients from the 80s who have not had their policies perform, but have received many calls from people with policies issued based on “current” returns (the current rate offered in the late 80s or early 90s, which was pretty high…8-12% on illustrations I have seen)</p>
<p>This is an issue more with universal life. Whole life is generally guaranteed. In determining the value of the policy, look at what he is paying versus what the pay out will be.</p>
<p>Is it a solid company like NYLIfe or Mass Mutual or some sort of “late night TV” small policy?</p>
<p>Hopeful - This is a very complex question with both analytical and personal components … there’s also a significant element of luck involved! Some people, like my Dad, were big believers in Whole Life policies. I don’t share his conviction, but that’s beside the point. He had his reasons and was satisfied with his decision. I tend to be more analytical. I cashed in a whole life policy my parents bought me when I was a baby, because it made zero sense to keep it. (Cash value was declining each year, and since I was under thirty at the time …) But I kept a similar policy DW’s parents bought when she was a baby because it was performing fabulously well. Why the difference in similar whole life policies issued at about the same time? Beats me.</p>
<p>Also, there is a place for a WL policy, it is a policy you cannot outlive (as long as the premiums are paid) therefore if the death benefit is important then the policy is important. </p>
<p>Many would contend they could just invest that premium money themselves each year and end up with the death benefit amount in their old age. That could happen, but what if the person dies young- not enough time to have built up the amount or what if the person invests poorly or chooses to spend the money saved on something else? It can be easier, IRL, to mentally forget about the insurance once the premium is paid.</p>
<p>Does your Dad need the death benefit? In general, if the cash value is higher than the death benefit, then the death benefit increases to the amount of the new higher cash value.</p>
<p>PS: the calls from people with problem policies were not policies written through our office so I have no specific knowledge as to why they did not work, I am assuming they were designed as the cheapest possible option at the time and those higher rates assumed did not happen</p>
<p>Who said it is called whole life because it is like digging a hole and dumping your money in it?</p>
<p>A term life policy, plus saving the difference in cost for the whole life policy, is almost always more financially rational.</p>
<p>I always ask the sales agents who offer me whole life to break out for me what component is covering the cost of the death benefit, and what component is going into savings. They never give a straight answer.</p>
<p>The whole ALW “buy term & invest the difference” certainly can work, if you do that; many people don’t invest the difference, they buy more term. But then, with a solid retirement, they may not need any policy after age 65.</p>
<p>The main people who seem to like a lifetime plan are people with an estate tax burden (like a small business without liquidity) or financially limited people who want a burial policy, which just seems like a crazy use of their limited funds.</p>