AboutJohn M. Buob Expertise I am a tax planner, preparer and business owner. Spent many years in the life insurance business. I advised business owners on the the aspects of business owership and tax planning for their business. I DO NOT answer questions about the stock market.
Experience I am a tax planner, preparer and business owner. Spent many years in the life insurance business. I advised business owners on the the aspects of business owership and tax planning for their business. I DO NOT answer questions about the stock market.
Question This life insurance is only good if I die by age 95. After this year the cash value starts to decline. I have paid $5,569. and the cash value is $3574. I was going to surrender it for the cash value and am told the amount would be counted as income for taxes. Is this correct since I have lost money
Answer The reason the cash value starts to decline after age 95 is because the monthly insurance costs that are deducted at that age are much higher than they are now. And they come out of the cash value just as they do now. Your premiums now pay those but because you are paying less than the monthly costs, your cash value plus the interest earned are not high enough to get the cash value to grow. But thats OK because all interest rates are so low every where. Probably when you bought it interest rates were form 6-12%. You would be amazed how much better the numbers look on those policies if the earned interest rates are 6-8%. IF you need the insurance, you may want to look into a term policy to cover you until you no longer need any coverage or if you don't need it now then cash it in. Thats your choice. The ONLY tax you pay on life insurance surrenders is any GAIN you have made in the policy and it sounds to me like you have not made any gains and therefore would owe no tax on any money you would get back.
