Does it EVER make sense to ditch term and keep whole life insurance?

[begood]

We're meeting with our dude next week, so I requested in-force illustrations of our insurance policies. Therefore, I thought I'd puke up some info onto the internet and see if I could get some words of wisdom.

I currently have two term life policies:

$100,000 that ends when I turn 75.
Premium cost: $298/year -- BUT that premium increases every year, up to $2K at age 74.

$325,000 (20-year term life) that ends when I turn 66.
Premium cost: $687/year -- that premium stays the same every year

I don't know what we were thinking. The T75 is complicated and increasingly expensive and seems completely unnecessary now. I only got that $325K policy five years ago, and I don't remember what drove that decision. Maybe getting while the getting was good? Maybe thinking if I died, the proceeds of those policies would replenish the stash if we'd had big health expenses prior to my demise? I really don't know. I'll ask my mister later tonight.

At the time we got that $325K one, my kid was 8; now she's 13, and in a community with a plethora of options for activities and care that wouldn't require forking over funds for "aftercare". I guess I'm wondering if there's any point in keeping either of those term policies now. I'm now 50 and probably would have a hard time getting anything cheaper later if I decided I wanted term life insurance.

I also have a 45-year-old whole life policy with a current death benefit of $33K and a cash value of $14K. Not as much death benefit as those other policies, but I also don't see much reason to ditch it now.
Premium: $65/year.

That's my policies.

My husband also has a $325K 20-year-term that expires when he's 56
Premium: $369/year constant

He's got some variable life bullshit we regret doing that's now "paid up" and has a current death benefit value of $185K and cash surrender value of $71K.
Premium: $0/year

And he's got a 26-year-old whole life policy with a death benefit of $80K and a cash surrender value of $25K.
Premium: $560/year

We're looking at starting to pay premiums with dividends - the cash value would grow more slowly, but it would keep the policy in force for less out-of-pocket. The premiums for both whole life policies could be completely covered by dividends. We also have one for our daughter (I KNOW! It's 13 years old! Dumb to ditch it now!) where the dividend would cover half the annual premium.

I know it's anathema to Mustachians to have whole life insurance, especially INSTEAD of term... I just wondered if in this case, there's some rationale for it. What's the tipping point for "self-insuring"? Is there a formula?

[MDM]

Does it EVER make sense to ditch term and keep whole life insurance?

I'm going to say "no" but that's trying to prove a negative so if someone has a counterexample....

What's the tipping point for "self-insuring"? Is there a formula?

You self-insure when you have enough funds and/or sources of income that your death would not significantly diminish the ability of your remaining family members to maintain their current and expected lifestyle.  Until then, good term insurance is the unselfish thing to do.

Unless you know you will die very soon.  That's the bad news, but the good news is you'll make the insurance company lose money on you.  Otherwise (i.e., if you live as long as statistically likely) the insurance company comes out ahead.

[Gin1984]

If you have a huge stash, and want to save more pre-tax and avoid inheritance tax, you might be one of the few that could use whole life insurance.  If you have a decent stash, and are expecting your husband to inherit, no, don't the whole life.

[mxt0133]

Most whole life insurance policies are used for estate planning and not for true insurance risks.  One would be to keep a policy that would pay estate taxes so that your heirs would get the house, vacation home, ect without having to come up with cash or selling the property to pay the estate taxes, if your estate is north of 10 million. 

The purpose of the increasing premium term is that you can insure for a larger amount when you haven't reached your earning potential that is why it increases over time assuming that your earning capacity is also going up.

[JoJo]

I know 99.9% of this forum is anti-whole life and will say to drop them but do some analysis on those older Whole Life policies, as sometimes you basically have a nice rate of return guaranteed in the policy.  Also, are any of the term policies "Return of premium" or have any other odd feature that you might benefit from by persisting?

If you want, you could PM the inforce illustration (redact any personal info) to me and I'll do some quick analysis - this is basically what I do for a living.

[begood]

I know 99.9% of this forum is anti-whole life and will say to drop them but do some analysis on those older Whole Life policies, as sometimes you basically have a nice rate of return guaranteed in the policy.  Also, are any of the term policies "Return of premium" or have any other odd feature that you might benefit from by persisting?

If you want, you could PM the inforce illustration (redact any personal info) to me and I'll do some quick analysis - this is basically what I do for a living.

Thanks for that offer, JoJo! I'll do that. I do not think any of them are "return of premium".

[Mr. Green]

You may want to consider the guaranteed interest rate angle of the whole life policy before you kill it. My grandparents took out whole like policies on my sister and I when we were born. This was toward the tail end of the rampant inflation during the late 70's/early 80's. The guaranteed rate was huge like 4-6%, depending on year. I'm sure insurance companies love it every time one of those old policies bite the dust because in today's low interest environment I'm sure they're costing them a mint. Just something to consider. I cashed mine out a number of years back and I regret the decision for the low maintenance cost while I am young.

[Bob W]

Hey, you are a life insurance salesman's dream!   

I would ditch the whole life and invest the cash value.

I would reduce the term probably too.

The tipping point is way less than you think.   Soc Sec generally pays a nice amount for children of deceased parents.   

Perhaps more importantly you should set up a trust and have the insurance proceeds paid to the trust.  The trust should be structured to invest in index funds and have predetermined payout amounts.  It should be administered by a trust company and the fee negotiated to less than 2% per year.   The trust can be set up to end at certain milestones.   Consult a trust/will attorney.   

The trust is important because as a rule surviving spouses (assuming there is one) typically spend all life insurance proceeds with 18-36 months of death.  This is true if it is 50K or 1 million.   Grieving puts people in a spend crazy frame of mind.   "Sure you can go to any College you desire and fly home twice a month. Don't worry about the cost"

[Cheddar Stacker]

1) term $100,000 that ends when I turn 75.
Premium cost: $298/year -- BUT that premium increases every year, up to $2K at age 74.

2) term $325,000 (20-year term life) that ends when I turn 66.
Premium cost: $687/year -- that premium stays the same every year

3) whole life policy with a current death benefit of $33K and a cash value of $14K.
Premium: $65/year.

4) husband $325K 20-year-term that expires when he's 56
Premium: $369/year constant

5) variable life has a current death benefit value of $185K and cash surrender value of $71K.
Premium: $0/year

6) whole life policy with a death benefit of $80K and a cash surrender value of $25K.
Premium: $560/year

First I'd like to quote Warren Buffett from his 2014 letter to shareholders: "Don't ask the barber whether you need a haircut." You need to figure this out before your meeting with your "dude" next week, because he/she will sell you on keeping all of these and adding a few more. These are making the dude a ton of money.

It's very kind of JoJo to offer advice. Hopefully it will be knowledgeable and helpful. Being what JoJo basically does for a living, I'm sure it will be informed, I just hope it's not too biased. Obviously JoJo won't benefit directly from any of these policies, but JoJo could feel the need to "defend" the industry a bit. I would trust JoJo way more than the dude though.

I numbered your policies so I could easily list my advice on them below. Without more info on your health, earnings, net worth, husbands age, built up social security benefit as Bob W mentioned and I've seen first hand benefit children upon their parents' death, it's really hard to answer these questions perfectly. However, I'll answer to the best of my knowledge based on the facts presented.

You have too much insurance. I think you know this, but I thought I'd throw it out there. Your daughter is in/about to enter High School, so you really only need a few years of coverage. Your husband can fend for himself, and you can fend for yourself if one of you were to meet your demise. So you need enough coverage, both money and years, to get your daughter through High School, or if you're really generous, College. So here's what I'd do if I were you:

1) Drop it immediately. An increasing premium on a term policy seems crazy. It's not worth the premium.
2) Keep it until your daughter is on her own, or until your Net Worth exceeds the $325K, whichever comes sooner.
3) Cash it out at your meeting next week. Use the CSV to cover all the premiums on the coverage you decide to keep. The annual premium is only covering the gap between the CSV and DB, which is $21K. You don't need $21K in DB coverage. If you pay the premium with the dividends you are reducing your return on investment. This same thought process should be applied to all whole/variable policies. Unless the guaranteed return is obscenely high, they will not be worth keeping, and the premium will reduce the return.
4) Keep it until your daughter is on her own, or until your Net Worth exceeds the $325K, whichever comes sooner.
5) I don't honestly know, and it likely depends on the return you're getting here. Ask JoJo I guess. But I would like to point out the CSV for this policy alone could likely put your daughter through the rest of her schooling, both HS and College if she chose reasonable schools. Cashing this out could eliminate the need to carry any life insurance at all.
6) Cash it out at your meeting next week. You don't need this at all. See the answer to #3 above and apply the same logic.

The only other reason I can think of to keep the WL policies is if you are already insanely rich and your estate will exceed $10 million. In that case you might want to hang onto all the WL stuff to cover estate taxes, since that is when it truly make sense to keep whole life coverage.

[begood]

Thanks, Cheddar Stacker, for going through them one by one! And yes, Bob W, we are undoubtedly a life insurance salesman's dream!

Getting some different viewpoints BEFORE we talk to the dude is the whole point of posting here. My husband considers the cash value in the whole life to be a bondlike component of our asset allocation. It's about 5% of our net worth, so in my view that part of it might not be worth courting marital strife over. I'm less interested in ditching the whole life than I am in ditching the two term policies on me. I don't mind keeping the term on my spouse - he is the breadwinner in the family. That policy expires the year my daughter heads off to college.

[TrMama]

I agree with the advice of cashing out the whole and variable life policies and keeping the two basic term policies. I'd also ditch the $100K term policy with the increasing premium AND your daughter's whole life policy. Other than for large estates the only other valid reason I've come across for whole life policies is for people who have some medical condition that makes them uninsurable via term insurance even though they still have a need for life insurance. Since you have ample term insurance, you don't fit into this category.

To determine how much term insurance you need, start by figuring out how much debt you have (mortgage, car, etc) and how many liquid assets you have (do not include home equity since your survivors probably shouldn't move). Get enough term insurance to cover the gap, plus enough for any other large expenses that will occur, such as college, for which you don't have any money saved.

[begood]

I agree with the advice of cashing out the whole and variable life policies and keeping the two basic term policies. I'd also ditch the $100K term policy with the increasing premium AND your daughter's whole life policy. Other than for large estates the only other valid reason I've come across for whole life policies is for people who have some medical condition that makes them uninsurable via term insurance even though they still have a need for life insurance. Since you have ample term insurance, you don't fit into this category.

To determine how much term insurance you need, start by figuring out how much debt you have (mortgage, car, etc) and how many liquid assets you have (do not include home equity since your survivors probably shouldn't move). Get enough term insurance to cover the gap, plus enough for any other large expenses that will occur, such as college, for which you don't have any money saved.

Interesting, TrMama. We don't have any debts. We also don't currently have any equity (we live in provided housing through my husband's job). So if something happened to him, we'd lose his income and our home in one fell swoop. We have 30x annual expenses currently saved, BUT we're (by choice) paying for private school, and we'll pay for college, and we're going to need to pay to live somewhere else eventually. So maybe there's no gap now, but there could be later if the stash is diminished by all those expenses? [Edited out some complainypantsishness].

[3okirb]

I know 99.9% of this forum is anti-whole life and will say to drop them but do some analysis on those older Whole Life policies, as sometimes you basically have a nice rate of return guaranteed in the policy.  Also, are any of the term policies "Return of premium" or have any other odd feature that you might benefit from by persisting?

If you want, you could PM the inforce illustration (redact any personal info) to me and I'll do some quick analysis - this is basically what I do for a living.

Thanks for that offer, JoJo! I'll do that. I do not think any of them are "return of premium".

A good rate of return only matters if you cash it in or take a loan against the cash value.  If you die, it's just the death benefit.  Doesn't matter what the cash value grew to.

[Cheddar Stacker]

We have 30x annual expenses currently saved, BUT we're (by choice) paying for private school, and we'll pay for college, and we're going to need to pay to live somewhere else eventually.

Yeah, you don't need any life insurance then. Really, none. And the CSV being 5% of your NW, by my quick math, you're already FI, but not filthy rich where you might actually need any WL policies. 

If your husband wants a bond, tell him to buy a bond or a REIT within a tax sheltered investment since the income is taxed at ordinary rates. Unless the guaranteed returns on any of these policies, after deducting any premiums, exceeds what a REIT would likely return, then you guys are not in an optimal investment for the fixed income portion of your portfolio.

[TrMama]

I disagree that you don't need any insurance, although you don't need as much as you have now. You're basically already FI, except you don't own a house and you'll have education costs for your DD. So, I'd carry just enough term insurance to buy a home. Cash in the whole life policies and earmark the money for your DD's schooling.

Is your DH military? I only ask because you mentioned you live in employer provided housing. If so, make sure his term policy does not contain the standard exclusion for death due to war, terrorism, riot, insurrection, etc. Nearly all term policies have this exclusion unless it's from USAA (in the US) or SISIP (in Canada). Frankly, I think it should be criminal to sell these civilian policies to service men and women, but it's not and they don't pay out if the person is killed in action.

[Cheddar Stacker]

I disagree that you don't need any insurance, although you don't need as much as you have now. You're basically already FI, except you don't own a house and you'll have education costs for your DD. So, I'd carry just enough term insurance to buy a home. Cash in the whole life policies and earmark the money for your DD's schooling.

It's a personal choice really. She could go with or without at this point. So I disagree with using the word Need I guess. They don't Need life insurance, they could opt to carry it if they would feel more secure in maintaining the exact lifestyle they've chosen.

30x living expenses are covered, but that doesn't include housing. Add in $18K/year in housing, which is way more than ample in almost all areas. If you think $18K isn't enough, consider that you wouldn't be tied to any city since you won't need a job, so you could move to a lower cost of living area. Social security benefits would likely cover $18K/year in the event of a death. If not, it's only a small hit to the stache, which by my math is ... a substantial stache.

[begood]

I disagree that you don't need any insurance, although you don't need as much as you have now. You're basically already FI, except you don't own a house and you'll have education costs for your DD. So, I'd carry just enough term insurance to buy a home. Cash in the whole life policies and earmark the money for your DD's schooling.

It's a personal choice really. She could go with or without at this point. So I disagree with using the word Need I guess. They don't Need life insurance, they could opt to carry it if they would feel more secure in maintaining the exact lifestyle they've chosen.

30x living expenses are covered, but that doesn't include housing. Add in $18K/year in housing, which is way more than ample in almost all areas. If you think $18K isn't enough, consider that you wouldn't be tied to any city since you won't need a job, so you could move to a lower cost of living area. Social security benefits would likely cover $18K/year in the event of a death. If not, it's only a small hit to the stache, which by my math is ... a substantial stache.

First, Cheddar Stacker, I just noticed your sig line and it made me laugh! Mine would read (and I suppose it could, couldn't it?) "Way down deep, I'm shallow."

Where we live now is HCOL, and the only thing higher than house sale prices are rents. For a modest (really, not fancy at all) 3/2 townhouse, we'd be talking $2100/mo minimum. A stand-alone house (again, not fancy!) would be more like $2500/mo. So more like $25K/yr for housing, and that wouldn't include utilities. And for reasons that don't need exploring at this juncture, we would very much like to stay here until our daughter finishes high school. So... five more years. ~$125K rent over five years? After that, yes, we could move to a LCOL (mild climate! socially liberal! with bonus unicorns that shoot rainbows out their behinds!) area to extend the viability of The Stash.

Which leads me back to the debate - keep the term/ditch the whole? Keep the whole/ditch the term? Ditch it all and buy stock in Krispy Kreme?

[Cpa Cat]

It makes sense if you have a roughly $6,000,000 estate (per person - so $12,000,000,000 for married couples) when you die. At that point, you're in the realm of estate taxes. Life insurance proceeds (with a beneficiary who is NOT the estate itself) are excluded from the estate for estate tax purposes. They are, in effect, tax free. The estate tax burden generally makes whole life worthwhile at that point.

The time to buy whole life, of course, is not when you're 89 years old with a 12 million dollar estate - it's when you're 40 years old and on track to have a 12 million dollar estate (adjusted for inflation). So if you think that's you, then it makes sense. But if that's you, then you want more than $300,000 of insurance.

[Cheddar Stacker]

The sig line is Jimmy Buffett lyrics but it sums up my life pretty well. I like your line as well, and your locational desires.

I actually typed $24K/year but changed it at the last minute. If you need to stay put for 5 years, $125K would suck, but that's barely more than the CSV of your WL policies. Yep, you don't need them. Cash them in, cancel all policies, even if the worst happens and you're both gone tomorrow, there is $110K available for your daughter from the CSV. Plus 30x living expenses for 3 people.

If I understood you correctly, the CSV is a small portion of your NW. I've almost typed what I believe to be your NW a few times now, but I don't want to disclose more info than you want out there so I held back. Your NW is a big number. What are you doing with life insurance on top of it? You're wearing a belt, and suspenders. It makes no sense when you step back and think on it for a bit.

At first I said keep the term/ditch the whole. As more has developed in this thread, I think the clear winner is ditch the term/ditch the whole. Congrats, you're FI!

[3okirb]

It makes sense if you have a roughly $6,000,000 estate (per person - so $12,000,000,000 for married couples) when you die. At that point, you're in the realm of estate taxes. Life insurance proceeds (with a beneficiary who is NOT the estate itself) are excluded from the estate for estate tax purposes. They are, in effect, tax free. The estate tax burden generally makes whole life worthwhile at that point.

The time to buy whole life, of course, is not when you're 89 years old with a 12 million dollar estate - it's when you're 40 years old and on track to have a 12 million dollar estate (adjusted for inflation). So if you think that's you, then it makes sense. But if that's you, then you want more than $300,000 of insurance.

A couple of things.  First, the estate tax has varied widely over time.  It's higher now, but it's one of the things politicians look at when wanting more tax money.  It'll probably settle at less than it is now, but no one has a crystal ball.  Second, it's not only the beneficiary that matters, it's the ownership that matters.  That's why there are ILITs (Irrevocable life insurance trusts)  Not that most of us will likely have this problem, but wanted to clarify for people that might.

[begood]

It makes sense if you have a roughly $6,000,000 estate (per person - so $12,000,000,000 for married couples) when you die. At that point, you're in the realm of estate taxes. Life insurance proceeds (with a beneficiary who is NOT the estate itself) are excluded from the estate for estate tax purposes. They are, in effect, tax free. The estate tax burden generally makes whole life worthwhile at that point.

The time to buy whole life, of course, is not when you're 89 years old with a 12 million dollar estate - it's when you're 40 years old and on track to have a 12 million dollar estate (adjusted for inflation). So if you think that's you, then it makes sense. But if that's you, then you want more than $300,000 of insurance.

I don't think that's us. And because our daughter is a minor, "trust under will" is the beneficiary on the policies at the moment - we will change that when she's older.

We would absolutely be FI, Cheddar Stacker... if it weren't for a couple of things that I'm reluctant to cough up here on the interwebs. Basically, if my husband for whatever reason took a different job, our expenses would go through the roof to stay where we are... which we feel strongly that we would want to do. Not complaining or excusing, just laying it out there. Having moved 5 times in 17 years, I'm well aware that Plans Change. I feel like my role (new to me! didn't used to know a damn thing about money!) is to optimize where I can, and this feels like a place we could optimize.

[JoJo]

I do not sell insurance but let’s just say I do a lot of “number crunching” on life insurance.  Even though it pays my salary, I don’t have a very rosy picture about the need of some of the more exotic products for most people.  I do think everyone who is working, has kids and/or married with a mortgage, should definitely have insurance.  The odds for death maybe small but bad things happen if the breadwinner dies.    Term insurance is usually the way to go for Mustachians.

As for the case at hand, a lot of this depends on who’s still working, how much they’ll earn in their remaining working lifetime, and what debts and any planned future expenses are.  You may need  or want to hold onto some of that insurance if you meet any of those situations. 

Be aware that if the cash value policies have any gain in them, you will need to pay tax on any gain in the contract if they are surrendered (Gain = Cash Surrender Value minus the premiums that have been paid to date) in the calendar year that they are surrendered.  The company may withhold some of the proceeds for tax.  Tax is deferred until the full surrender occurs so another idea is to surrender them after your working years, when in a lower tax bracket.  So basically I'm saying not to go and surrender these all in one year because you might pay a sizable tax.


Term policies:
•   the two policies on you are slightly expensive compared what you could get on the open market assuming you’re relatively healthy (no diseases, normal cholesterol, blood pressure, build).  Drop them if you don’t need them – especially the one with increasing premium.
•   The one on the husband is actually a decent price.  One thing that folks should consider about level term is that with a level premium for say 20 years, expected mortality starts very low and increases steadily over time such that typically in the last 5 years or so of 20 year term you’re actually getting a really good deal (like premiums < expected claims).  At that point the insurer is happy if you cancel the policy.  But for an individual person it’s all or nothing – you either die and get a big benefit or you don’t die and all of those premiums are “gone”.

Whole Life:
•   You showed me 3 illustrations.  Ignoring the death benefit, and just looking at Cash Surrender Values,  over the next 20 years the expected annual return on each policy is about 1-2% if no dividends are paid or 5% if the current dividend scale is paid.  So, once you factor in the death benefit on top of that, these policies might not be that bad.   Keep in mind that we’re in an extremely low interest rate environment and if interest rates go up those dividends would likely go up too and if the dividends go down, likely the insurer has to send you a letter to tell you that.   Since your husband wants to have some fixed-like investments (and where can you get 5% these days?), you can always hold onto them for a couple more years and reevaluate then. 
•   If you don’t need the insurance death benefits to keep on increasing over time, I support having the dividends pay the premiums.  This will free up those premium payments for other use and you should still see roughly the same returns I mentioned in the first bullet point.
•   The policy on the child had a fairly expensive “Additional Purchase” feature.   This rider lets you buy more insurance without underwriting no matter what their health is.  One example that it would be useful is if the insured person has some kids, gets a deadly disease, and wants insurance but can’t get it – this allows that person to purchase insurance up to a given amount.  I would probably drop this, to save about 10% of that policy’s premium.
•   All policies had a waiver feature, which would waive premiums if you're disabled.  It’s relatively cheap but if you decide to have the premiums paid by the dividends, you could drop that too.

Variable
•   I didn’t see the illustration so I’m not sure if this is a Variable fixed premium life or Variable Universal Life, with flexible premiums.  Beware the reference to “paid-up” on VUL.  Since the market may drop out, it may not really be paid up, because when the cash values drop, the charges rise.    I’d probably drop this one before the Whole Life policies if you don’t need the insurance and this doesn’t have a guaranteed return.  Also, it’s likely that the investments in the policy have hefty management fees – so better to drop this and put in low load indexes.

[begood]

JoJo, thank you so much for taking time to review and assess the information I sent you. I appreciate that you took some of your precious free time to help a stranger on the internet!

I read your post aloud to my mister last night. For a first step, we've agreed we're dropping the $100K increasing-premium term policy on me. We're debating whether to keep my other level term policy - the $325K one. I have until July to decide - that's when the premium would be due.

We're going to keep my husband's term policy in place until it expires when he's 56 (six more years, or through high school and into college for our girl).

We're also going to start having the dividends pay as much of the premium on the WL policies as possible starting immediately, since the death benefit increase is not important to us. I didn't make much headway with the mister in terms of the idea of just surrendering the whole life policies for the cash value and investing it in actual bonds instead of this bondlike thing. The tax info is very helpful! I'm sure this was the first of several conversations we'll have about it.

The variable life thing is something we both agree was not our best decision. It seems to be a Variable CompLife policy (it says "former VCL paid-up" and that's what Google got me).  We do not pay an annual premium on it, but it is still getting dividends and the cash value and death benefit continue to increase. It seems to have had some wicked surrender penalty up to policy age 15, but we're at 17 now, so no penalty. I want to make sure it's not volatile/vulnerable and could lose value. We were young and stupid. Now we might be old and stupid but at least I have the internet for support. ;)

[3okirb]

Insurance should primarily be sold for the death benefit.

The "side product" is cash value, and it has some uses.  I can think of 4 legitimate uses.

1)  Builds up in early years to sustain the policy in later years and keep the premium level for life.
2)  If you're so terrible at saving that the only way to do it is to force it through monthly premiums with surrender periods for so long that you have to keep the money in there until a later date.  For example, a lot of people would look at cash value like yours and think, "Wow, they could have had so much more if they had invested elsewhere".  The reality is that a lot of people would have just spent the money along the way.
3)  Estate tax (only if you'll have more than $5.43million or twice that for married couples. 
4)  If you make so much money that you don't qualify for IRAs, etc. OR have already maxed them out, there can be certain situations where it makes sense to have tax free access to your money in the future (kind of like a Roth).  This is a more complex situation that isn't "set it and forget it" and takes a little more planning on a yearly basis.  (You can make HUGE mistakes doing this with someone that isn't 100% knowledgeable.

[JoJo]

One more thing on the Whole Life policies if you use dividends to pay premiums.  If you fail to pay any remainder of premiums, it will go into a non-forfeiture option, such as reduced paid up or extended term.  I would avoid this, as sometimes it means that dividends stop altogether (so your 5% return goes down to 1-2%) but this depends on the product.  If on extended term, the cash values actually may start shrinking.  The company is required to give you 30 days notice if this is going to happen to catch up on any due premiums.

[begood]

One more thing on the Whole Life policies if you use dividends to pay premiums.  If you fail to pay any remainder of premiums, it will go into a non-forfeiture option, such as reduced paid up or extended term.  I would avoid this, as sometimes it means that dividends stop altogether (so your 5% return goes down to 1-2%) but this depends on the product.  If on extended term, the cash values actually may start shrinking.  The company is required to give you 30 days notice if this is going to happen to catch up on any due premiums.

The dividends should be enough to more than cover the premium for my WL and my mister's WL. It would cover about half of our daughter's annual premium, and we would pony up the other half. If we keep the policy. I keep thinking what a nice nugget the cash value ($6K) would be to set her up with a Fidelity 4-in-1 fund and just let it do its thing for decades.

[begood]

We had our  meeting with the insurance dude yesterday, so I thought I'd provide an update. It will become clear that we're taking small steps, not giant leaps, but at least we're moving!

We cancelled the accelerating premium term life policy on me.

We're keeping the two remaining term policies for the time being - one on me; one on my husband, both for $325K. During our discussion, we remembered what had driven the decision to get matching policies in terms of benefit and it's still valid enough that we're going to keep them in place until our daughter is out of high school - five more years. My husband's policy will end its lifespan around then, and we'll cancel mine at the same time.

We're going to pool all our dividends and use them to pay the premiums on all the policies, including the two term policies and a hefty chunk of my husband's disability policy. The cash value will increase more slowly in the WL, but our out-of-pocket insurance costs should drop by 66%.

The most expensive policy by far is my mister's long-term disability insurance. It's the only one of the policies that I didn't discuss dropping or adjusting. As far as I'm concerned, that'll be the last thing to go.