I messed up, bought life insurance, and could use some advice...

[BatDad2]

So, my wife and I started on our FIRE journey about 3 months ago when we had a wake-up call that we didn't want to be doing this whole job thing for the rest of our lives. We wanted to actually live and enjoy our children and each other. We've been pretty pleased with the changes we've made thus far and feel really good about our new direction and plan to be FI in about 8 years, but there is one thing that keeps eating at me I just can't stay on-board with that my wife thinks we do.

About 5 years ago, right before we had our first child, we got suckered into the whole Indexed Universal Life policy for each of us. The advisor says "Blah blah blah," Us, "sure we'll take it! And wouldn't you know it, when you think about working for 40 years, you consider it an "investment" for your future and that of your children, so you sign up for more, one for each of the kids! And...oh why not get some whole life for yourself because you NEED life insurance and why not make it an investment for retirement too (no thanks said to that investment joker).

Ok, re-reading that made me sick. I've put a lot of money into all of these and realize it's probably better to get out, but I also know that there are some major penalties, surrender values, etc...

Here's our situation:
- IUL for me (5 yrs)
- IUL for wife (5 yrs)
- IUL for child #1 (3 yrs)
- IUL for child #2 (2 yrs)
- Whole Life for me (1 yr)
- Whole Life for wife (1 yr)

Pretty bad deal now that I look at it more. Anyway, I know now I probably never should have ventured down this path since we make great salaries and could have poured all of this into a simple index fund, but I'm at a cross-roads with explaining why and how we should get out to my wife and would really appreciate the knowledge and opinions of you fine mustacian folk.

Be gentle.

BatDad out, gotta fly

[ysette9]

Don't beat yourself up for what you didn't know! We made a similar mistake when we got life insurance by nuit what was recommended to us. I later woke up and realized that the whole life policies were pointless and we just canceled them. We got some $ back from their value and just out that into savings. We kept the term policies.

[Step37]

I did the same and kicked and face punched myself over it. Then I finally cancelled the three policies (life insurance, disability and critical illness -- no debt, no dependants, lots of savings, and already had a small term life policy that was more than enough) and considered it a lesson learned/sunk cost. I did get some of the money back on the life policy I'd paid into for a few years.

You've obviously determined that you could do better elsewhere with your money and that these policies are not needed for your family. Show your wife the math. Total spent minus anything you'll get back = sunk cost. Putting this same money into index funds monthly will break us even in "x" months; everything after that is building towards our FI future. As long as the kids and surviving spouse are looked after in the event of the worst happening, I imagine she'd be agree with your plan.

Once I'd determined that I was totally wasting money on my policies, it STILL took me a year of wasting even more money on them to pull the trigger and cancel... but it's done now and it felt so good to finally take care of it.

[ysette9]

What does IUl stand for? I'd recommend term policies for you and your wife and disability insurance for whoever works. Screw policies on the kids unless they are child film stars or something and you count on that income to make ends meet.

[CupcakeGuru]

DH and I also had universal life insurance policies for a couple of years. We finally saw the light and cancelled them. Got very little money back. We consider the loss as "stupid tax".

Just make sure you get term policies in place before you cancel the universal life.

[des999]

What does IUl stand for? I'd recommend term policies for you and your wife and disability insurance for whoever works. Screw policies on the kids unless they are child film stars or something and you count on that income to make ends meet.

Indexed Universal Life, basically, it's an investment mixed in with a life Ins policy (if I understand it fully).