Author Topic: Help/opinions on existing Whole Life insurance, keep it or cancel?where to look?  (Read 1776 times)


  • Bristles
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  • Posts: 316
Greetings (and thank you for reviewing the post below)

one of the items we are not sure what to do with is existing policy , details below.
Policy - Mass Mutual ("Whole Life Policy with Premiums Payable to Age 65") purchased for my wife 23 years ago by her parents when she was a kid. face value 250k, current "Net Cash Value" 51k , "Death Benefit" 300k. Annual premium ~1900 which when reduced by dividends against premium comes out to ~370 this year.  Policy comes with 50k "Insurability Protection" rider.

where we are
- i/we do not feel we need any insurance at this point (no debts at all including car/house, both work and are employable in case of job loss, 1.5m in liquid assets, we live on 25% of the gross earnings right now with no expectations of changes). at the same time we are not in need of money so this is purely financial decision at this point.
- i do not know what the impact would be of "canceling" the policy (in particular tax impact) . what questions should we look into/ask? are there multiple ways to terminate the policy and anything specific to watch for?
- i do not understand how Mass Mutual calculates dividends and what the fees are that it takes to run this. I looked through policy documents multiple times and am not seeing it. how do I compare this with any other investment?
-  we max out our 401k and IRAs already, is there value in keeping this policy as additional tax deferred savings?

thank you


  • Senior Mustachian
  • ********
  • Posts: 11236
If you cancel it and take the distribution, any distribution amount above premiums you have paid from your own funds will be taxable as ordinary interest income.  So yes, you'll have to pay tax on that.  But you'll have the money and can then invest/spend it as you like. 

Check the interest rate being paid on the whole life balance.  It is likely low, thus you can likely do better in a taxable account even having to pay taxes there.

This could be an exception but the rule is that whole life, particularly for people in your situation, is not a good investment.


  • Pencil Stache
  • ****
  • Posts: 769
  • Location: West Michigan
Back in the day, there were some whole life policies sold with excellent guaranteed returns built in. (Excellent in current times of interest rates hovering around 0%, look up what banks were paying on savings accounts 23 years ago.). I would NOT give up a policy that old if it guarantees, say,  a 6% return.  They cannot sell those kind of policies anymore by law.  I wouldn't get a WL policy now a days, except in very limited circumstances.

(Disclaimer:  I do not sell insurance and never have.  I had a class on insurance last summer as part of my finance degree and learned of these back then..)