Advice, thoughts, insights on life insurance policy parents took out on me...

I am linking to my journal which gives more background on me.

https://support.youneedabudget.com/t/h4djw4/laying-it-all-out-there

I posted this entry as my last one but want to get more eyes on it. 

Quick info- Single, 47

 So here is the info. Above you read that I remembered a life insurance policy that my parents took out of me when I was younger. I had no details but it could be the solution to my $1302 tax bill this year.  Made some calls and this is what I know now:

1. Its an adjustable life insurance policy beginning 2-1-1989. Premiums are $132/year. 30 years=$3960 paid into it.  This is a 50,000 policy. My parent still pay $11 a month but the premiums are actually higher at around $13/month and they take that from the cash value. 

2. Current cash value is $2915

3. Max cash value will be in 5-6 years at $3164 and then go down in value, significantly dropping off at age 61 and no cash value at 65. 

4. Options:

a. I can surrender the policy. Pay surrender fee. Pay my current tax rate in taxes which is 22%. Roughly $600. Cash in hand $2100 ish. Mom stops paying premiums. $1302 for taxes. $600-700 for NOLA. Any extra to savings. 

b. Borrow money up to amount of premiums paid into it minus any dividends and fees which should cover the taxes owed and a little extra for my NOLA trip.  I can pay it back but I don't have to, it will just deduct from the death benefits.  Policy remains open with reduced death benefits. Premiums still being paid. 

c. Roll the entire thing over into another type of higher interest account. Me having to borrow money from parents for taxes. 

d. do nothing with it

5. Through work I have a 95,000 life insurance policy. I can retire in 6 ish years. I can convert this policy into an individual policy  with no medical exam when I leave my job. I also have currently 22,500 accidental death and dismemberment that the work provides. I have a voluntary 125, 000 ADD policy. ADD policies terminate when I leave.  Currently covered at 239,500. I have no dependents and that covers all debt and mortgage. 

6. I called my mom and she is okay with me cashing it out since it's my policy but she just wants to make sure I have life insurance when I retire and that it could likely be really pricey due to my age at retirement (53).

I haven't made a decision. I know i *need* that money for taxes. I feel kinda guilty about using it. I feel guilty about parents paying on it still.  

7. This would put me ahead financially about 8 months to my goals. A great kickstarter and afford me NOT to have to have a big tax bill next year because I can reduce my allowances/deductions. 

Any insights? Advice? Things I need to consider and/or am overlooking?

 

-jewel

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  • If you have no dependents, why do you need life insurance when you retire?

    Like 4
      • Jewel
      • fREEDOM_TO_breathe
      • 1 yr ago
      • 2
      • Reported - view

      jenmas It's not always about dependents. What if say a person doesn't have any savings to pay for a funeral? Or what if you own a house that your family will need to sell but you had no money for them to do repairs to sell the house. You can be debt free and there still be costs that your family will have to pay unless you have a huge amount of savings.  I would never want to have my family have to pay out of pocket for anything for me if I am not here. Ideally speaking, I would have tons of money saved up by then but things happen. 

      Like 2
      • jenmas
      • jenmas
      • 1 yr ago
      • 1
      • Reported - view

      Jewel I guess it just doesn't seem like that much of a risk if you don't have dependents. The debt on the mortgage belongs to your estate. If your family members can't afford the running costs of the home in the interim before selling, they can surrender the house to the lender and just walk away from it. And you could get a burial insurance policy and most of those won't even let you buy in until you are 50.

      Like 1
      • Jewel
      • fREEDOM_TO_breathe
      • 1 yr ago
      • Reported - view

      jenmas That's all true as well! I guess I just want the process to be as easy as possible for the family that remains. 

      And the burial policy is a possibility. As a 47 year old, it's hard thinking about such things. 

      Thanks for the insights!

      Like
  • Are your parents dependant on your financial help? Is that why you need insurance?

    Like 3
      • Jewel
      • fREEDOM_TO_breathe
      • 1 yr ago
      • 1
      • Reported - view

      HappyDance No they are not dependent on me financially. But if say something were to happen to me right now, I have enough insurance to cover all my debts and other expenses so they don't have to. If once I become debt free and build up savings maybe then I wouldn't need to worry about having insurance cause that would all be covered by my savings for things like funerals and such. But I am not there yet. 

      Like 1
      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 1 yr ago
      • Reported - view

      Jewel 

      That makes sense.  I'm single with no dependents and no debt.  My assets will bury me and leave a few gifts to loved ones.   That said, I didn't turn down the cheap, group term insurance offered through my employer. For a few dollars a month, I have 2.5 x my annual gross income in insurance.  I got it when I started working here and didn't have much in net worth, was still carrying debt, and there wasn't enough liquid cash to bury me.  I'm happy to say that situation has improved significantly.  Still, I continue carrying it for the few dollars it costs me just because I already have it, I guess.  I'm not sure where I stand on what I'll do with the insurance plan when I retire. I suspect that since it's term, it will become increasingly more expensive until not affordable.  But that's a decade away for me, so I'll figure it out closer to that time.

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      • Jewel
      • fREEDOM_TO_breathe
      • 1 yr ago
      • Reported - view

      HappyDance And I am lucky for the 95,000 and 22,500 insurance policies that's a benefit for me. No charge!  The 125,000 policy I pay 1.75 a month. I am hopeful that one day when I retire (6 years, 6 months and 2 days!) I will be debt free and this won't be an issue. Thanks for responding!

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