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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: maryofdoom on February 27, 2013, 08:00:25 AM

Title: A question about a life insurance policy
Post by: maryofdoom on February 27, 2013, 08:00:25 AM
Hi friends,

Another day, another question for the group.

In an effort to plug the small leaks in our stache, I'm examining all our monthly bills. (This is a good idea to do regularly, regardless.) Anyway, my husband has a life insurance policy that his mom set up for him when he started working. (She did this because my husband began working at his job when he was 20, and thus wasn't able to set these things up on his own; plus his family is familiar with traditional types of investment vehicles and not so much with the stuff we have today, like index funds and dollar-cost averaging.)

The policy is through Prudential and is a Custom Premier Life Insurance Policy. It has a basic insurance amount of $75,000.00 and a Type B (Variable) death benefit. He has something like $5,200 sunk into it already. It's costing us $60 per month and it's driving me nuts.

Now, we get life insurance already through my job. I have a policy on him through there and one for me that replaces two years of my salary. Plus, I have a policy my parents set up for me when I was born. We also contribute regularly to our retirement accounts, where we are one another's beneficiaries.

With our Mustachian lifestyle, I don't see the continued need for this particular insurance policy. We don't have children and are not planning to do so. If something happened to one of us, the other would receive the existing assets that we've obtained in the course of our marriage, and would still be able to work in some capacity. Plus our house will be completely paid off in a couple of years.

Can I close this policy and roll the cash over to a Roth IRA with few to no tax consequences? Or do I need to call my investment guy (my parents' investment guy, really) and discuss it with him? Should we discuss this with our accountant, whom we will see in a couple of weeks for getting our taxes done?

(The husband also has a custodial IRA that his mom set up for him, but that's a whole different kettle of fish.)

Any input you have would be most welcome. And if you need more information, just let me know.