Cashing in universal life insurance?

[Marisa6826]

We both have a combination of term and universal life insurance. The monthly premiums are too crazy, so we want to drop the universal, but buy additional 20yr term.

What happens to the money that's accrued under the universal? Can we cash it out? Does it just get rolled over to purchase the term? It's a pretty sizable amount, so it would most definitely come in handy. I saw on the statement that there's some sort of fee involved if we were to switch it around. The fee isn't cheap, but it would still be enough money that it would be worth it.

I have laryngitis at the moment and can't speak loudly enough to actually call the agent. D'oh! I know that the agent spoke to a couple of different underwriters, but he wants to discuss it in person. I HATE those kinds of meetings.

Anybody have experience? Lori?

TIA

-m

[Momof3Labs]

It's a losing proposition. Unless you've had the policies a very, very long time, you probably don't have much cash value built up (which is what you would get, not the nice fund value you see on your statements - the difference between the fund value and cash value is called the surrender charge). The companies get rich off of early lapses like this. But if you think it is right, you can take your money and buy a new term insurance policy (which, BTW, you will need to go through underwriting to get). If you had a boatload of cash value, you may be able to take a reduced paid-up or extended term option with the cash value (rather than taking cash) but you would have to compare it to what you'd get in cash. Also depends on how your health is now, and what kind of underwriting classification you'd get on a new policy.

[o_mom]

I would get the 20 yr term first, make sure you qualify and have the policy in force before you cancel the universal. You should be able to call the agent (when you get your voice back) and find out the surrender amount on the policy. That would be the amount you get back.

[Marisa6826]

Lori-

The policies are about four years old. Even after the fees, it's about $12k. That would REALLY come in handy right now.

On top of it, when we bought those policies, Jonathan had been very recently diagnosed with Diabetes. He's now 20lbs lighter, and his A1C levels have been consistently dropping. Not as much as they probably could, but dropping nonetheless. I'm hoping it's enough to put him on a lower table.

I've been diagnosed with asthma since the policies were purchased, so I don't know what sort of impact that would have on my policy.


O Mom-

Good idea about buying the new term and THEN dropping the universal. Thanks

-m

[julieakc]

Marisa:

Another possible option with the universal policies is to stop making payments, but do not surrender cancel (or cash out) the policy. The policy will remain in force with the premuims paid from the accumulated cash value (the $12k you mention), which will decrease as the premium is paid. Make sense?

I know this option doesn't get you cash in hand, but it does save you the monthly premuims AND keep you insured.

You'll have to check your policy, or ask your agent, to find out if this is an option with your policy, but I think it is with most universal policies.

HTH and good luck.

[egfmba]

This is what I'm doing on a whole life policy I have. I couldn't afford the premiums, but I didn't want to deal with cash out, etc. so I just let the accumulated value pay for the policy. When it's close to running out (and we get regular statements, so we'll know) I'll get a term policy. I'm still young enough that the cost won't be significant when that happens, but in the meantime, I'm letting what I've already paid pay for *me* now.

Good luck with whatever you decide.
eva

[spu]

PLEASE READ --- if DH has diabetes, whatever you do, KEEP any policies that you currently have! (sorry to use all caps... :) My DH has type 1 diabetes, and in almost all cases, type 1 diabetes is an automatic decline... he's in a tough situation since he's had type 1 since age 13, and despite modern advancments, the insurance biz either rates type 1's on a terrible table, or they are an automatic decline. My DH's A1Cs are between 6 and 7, and he's not overweight by any means.

Other options might be to port existing insurance when you leave a job, or to get one of those policies that they advertise on TV for seniors during Price is Right... and they're terribly expensive, or try to get a less expensive policy through a group association, but sometimes even these policies require underwriting.

I know it's tough making the payments, but if there's any way to keep his policies, keep them. Maybe if he's newly diagnosed, he'll have an easier time getting coverage compared to someone who has had diabetes for 20+ years, but until you have an acceptance letter from another policy, my best advice to you is not to cancel.

Also, I wouldn't tell them anything about your new health stuff going on unless they come to you and ask or if it's stated in your policy that you must ... they may drop him or raise yours and his rates just because of that.

If you do find a place that insures him, let me know. We're always in the market.

good luck!
susan

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[Marisa6826]

Susan-

He has type II, so I don't think he's in the same boat as your DH. He's not insulin dependent - just metformin.

Penn Mutual is who we have the policies through.

-m