Cash Value Life Insurance

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moda0306
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Cash Value Life Insurance

Post by moda0306 » Wed Jun 22, 2011 3:14 pm

I know they're frowned against here, but I purchased $200k in CVLI in 2008, at a minium dividend of 4.5% (they've been paying higher).

1) How bad are these things, really?  How easy is the cash value to access?  Do banks reallly value it as collateral?

2) Can I get out of this contract and still do better with my money including penalties, etc?  It's been exactly 3 years (and $6,000 bucks) since I started.  I'm still obligated to pay about $2,000 per year for a LONG time at this point. 

I know you fellas can't see the contract... just seeing if you had any input.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

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MediumTex
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Re: Cash Value Life Insurance

Post by MediumTex » Wed Jun 22, 2011 3:53 pm

What kind of car did the guy who sold it to you drive?

If it's a nice car maybe he would give you a ride in it some time, since you are helping him pay for it.
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moda0306
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Re: Cash Value Life Insurance

Post by moda0306 » Wed Jun 22, 2011 3:54 pm

Thanks, MT.

Now for those that don't want me to feel like a financial novice and won't immasculate me here, I'd appreciate your input.

I kid.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

- Thomas Paine
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Re: Cash Value Life Insurance

Post by MediumTex » Wed Jun 22, 2011 4:26 pm

We've all done things that we might do differently if we had it to do again.

The only wild card with life insurance is that at any time you could become much more expensive to insure.  Modern medical diagnostics can identify health conditions that in the past you might never even have known you had.  Lots of these conditions may not require treatment of any kind, but it will still jack up your life insurance costs A LOT.

I might put together a plan to exit this policy and replace it with something like 30 year term coverage, which will cover you during most parts of your life where loss of income due to death could be catastrophic for your dependents, but keeps you out of the black hole of whole life coverage.
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moda0306
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Re: Cash Value Life Insurance

Post by moda0306 » Wed Jun 22, 2011 4:32 pm

Am I breaking a contract by exiting the policy?  I have it at home but really can't remember the terms of getting out of it.

I figure now I might as well keep it if I can access the cash relatively easily and have paid the initial expenses.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

- Thomas Paine
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Re: Cash Value Life Insurance

Post by quenali » Wed Jun 22, 2011 7:50 pm

Moda,

A few questions;

How old were you when you bought the policy ?

You said you've paid $6,000 in premiums so far.  What is the cash value now ?

Have you called the agent or the insurance company and asked what the "surrender charges" would be if you wanted out of the contract ?

Why did you buy the policy and have you discussed your "buyer's remorse" with the beneficiary of the policy ?
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moda0306
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Re: Cash Value Life Insurance

Post by moda0306 » Wed Jun 22, 2011 8:54 pm

24 when I bought the policy.

Not sure of the cash value.. probably about $2,500-$3k.

I haven't asked about surrender charges.

I bought the policy because I thought having insurance for my wife would be important, but I did cash-value instead of term because of the value it could (supposedly) provide as an investment.  I've told my wife it probably was a flawed decision, though I still don't see it as really all that bad.  They pay good dividends (4.5% minimum).

Thanks!
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

- Thomas Paine
quenali
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Re: Cash Value Life Insurance

Post by quenali » Thu Jun 23, 2011 5:45 pm

I think you'll  be okay.  I congratulate you for buying insurance at your age. 

Generally, I think it makes sense not to mix insurance with investing although the advantage is that your policy is "forcing" you to save $2,000 yearly. 

As MT has noted before, the Roth IRA (with it's internal tax free growth) was supposed to put these products out of business.
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