AboutMichael Feinberg, ChFC Expertise I am the Executive Director of Synergy Financial Services, concentrating in
life insurance, long term care insurance, and long-term and tax-advantaged
investing. I am licensed for Life, Health, and Securities. I am always happy to answer any questions you may have on any of these
topics.
Question I CURRENTLY HAVE A TERM LIFE INSURANCE POLICY WITH A MAJOR INSURANCE COMPANY. THE POLICY HAS BEEN IN EFFECT FOR ALMOST THIRTY YEARS. IT WAS ORIGINALLY PURCHASED TO PAY OFF OUR MORTGAGE IF I PASSED AWAY, THEREBY ELIMINATING FINANCIAL PROBLEMS FOR MY WIFE. THE POLICY HAS A CASH VALUE CLAUSE AND CURRENTLY IS WORTH ABOUT $5000. THE PAY-OUT IS $42,000, WHICH WAS THE AMOUNT OF THE ORIGINAL MORTGAGE SHOULD I DIE. WE NO LONGER HAVE A MORTGAGE PAYMENT AND I HAVE GROUP LIFE INSURANCE WHERE I WORK. THE PREMIUM FOR THE TERM INSURANCE IS NOW ABOUT $500 EVERY SIX MONTHS. WE ALSO HAVE A BURIAL PLAN WHICH WOULD PAY A LARGE PART OF ANY FUNERAL EXPENSES. SINCE THE ORIGINAL INTENT OF THE POLICY NO LONGER EXISTS, SHOULD WE CASH IN THE POLICY OR NOT. WHAT IS YOUR OPINION? THANKS FOR YOUR TIME.
Answer Hard to say for sure because there are a few missing pieces of information (your current age, current health status, and your level of financial ability/comfort with the insurance premiums at their current levels. Also... on term life insurance policies (which typically don't carry any cash value component, by the way) typically after the level term premium period expires, the premiums jump up and keep going up year after year from that point. If this is happening, you should be aware of it -- in case your $1000/year premiums will be escalating to a higher amount.
It sounds from your comments that you have no real need for the coverage, which essentially is valued at $37,000 of life insurance protection (since the $5,000 cash value is presumably yours upon cancellation at this point). My only reason for potentially suggesting you keep the coverage would be the fact that your group life insurance from your employer will not continue beyond your employment years there. If you need coverage beyond that, this policy may be valuable (assuming the premiums do not escalate to an unreasonable amount).
Sorry to give you a hedged answer, but the decision really lies in the details that weren't provided and are more subjective to your needs than objectively able to be answered.
