Author Topic: Cashing out Life Insurance...Just get a Check? Any Other Advice?  (Read 141 times)

uneven_cyclist

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Cashing out Life Insurance...Just get a Check? Any Other Advice?
« on: December 01, 2022, 08:22:34 PM »
Hello all -- my wife has a life insurance plan that she's had since she was a child and we are thinking that it probably makes sense to cash it out. 

Policy details:

Death Benefit: $60k
Policy Debt: $7k (my wife took a loan to pay for school several years ago and never repaid)
Cash Value: $14k
Net Cash Value: $7k (This is the cash value minus the debt)

Life situation details:

The Death Benefit would be helpful but not a game changer for our family at this point since our net worth has climbed well beyond that figure.

Questions:

1) Does it just make sense to cash out and put the $$ into our investments (IRA etc?)
2) When cashing out a policy like this, is it necessary (or common/sensible etc) to roll the $$ into an IRA or do people usually just take a check?  I don't even know if you *can* do that...What is the best practice?
3) Any other considerations to take into account?

I would be grateful for any info...at this point we're pretty sure that we'll just cash out, but wanting to make sure we don't make any dumb mistakes.

Thanks!!




plog

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1. Yes.

2a. Not necessary, who cares what's common, probably sensible.

2b. Best practice is probably some sort of electronic transfer.

3. Just the obvious but easily overlooked -- you won't have life insurance from this source any longer.  If you still need insurance get the appropriate term life in place before cancelling this one.

Freedomin5

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Do you still have to pay a premium on this policy? Or are the returns generated enough for the policy to maintain itself? I have a policy that was opened when I was a child. The premiums are so low and the returns are sufficient to cover the premiums that itís basically $250k free to my beneficiary when I die, so Iím just leaving it alone. Plus, I think insurance proceeds are not taxed in my province so it helps with wealth transfer.

uniwelder

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Posting to follow. I have a 25k policy from when I was a minor, with 1k cash value. The interest return covers the premium, so I havenít bothered paying further into it or cashing it out. Iím curious to read what responses OP gets.