Summary: If you're thinking about buying life insurance, there are several policies to consider including a universal life insurance policy or cash value policy and term life insurance. With a universal life insurance policy, you pay over time and part of the premium goes into a savings plan with little value unless you stick with it for the long run. With term life insurance, you pay a smaller yearly premium for a certain length of time. Because term life insurance costs less, it offers more of an opportunity to save on your own.
Q: I have universal life policy for $50,000 that I have had for 15 years and the cash value is $6,000 if I should cash it out.
Should I get term and cash out this policy?
A: Cash value policies are worthless unless you're going to keep them for the long run. But now you can see the problem: 15 years into paying on it, and you only have $6,000 in the cash value part of the plan, and will $50,000 really be enough life insurance? Probably not. You may be better off stopping this now, taking your $6,000 and buying enough term life insurance to really cover your loved ones in case of an emergency. A healthy, non smoking 35-year old man can buy $500,000 worth of insurance for about $500 per year. You could invest the rest ($5,500) and probably have enough money to pay this bill for the next 15 to 20 years.
Jan. 1, 2005
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