Should I hang onto a life insurance policy started by parents when I was 7?

[FI by 2035]

I have a life insurance policy with New York Life that my parents started for me when I was 7 years old.  I took over the policy after getting a real job out of college.  I have always been somewhat skeptical that it's not the best use of my money, but felt obligated to keep it going.  The agent told me that eventually, I won't need to make a premium payment on it because it will be earning enough in the dividend.  If that is going to come sometime soon, then it seems like it would make sense to keep it.  The problem is that I have no idea how to estimate when that would be, or if I would still be better off cashing it out and investing the money elsewhere.  Is there anybody who knows more about this topic and could give me some insight if it is something I should keep.  Below is all of the information I can find about it on my account.

Policy Type                   Whole Life Insurance
Policy Status                    Active
Policy In Force Since   10/15/1997
Anniversary Date           10/15/2015
Policy Face Amount           $25,000.00
Premium Paid to Date   10/15/2016
Premium Amount           $196.00/year
Net Cash Value**      $2,637.82
Cash Value Increase from Previous Year      $150.00

Maximum Dividend Available for Withdrawal   $597.56
Dividend Option                                               PAID UP ADDITIONS
Anniversary Dividend                                   $43.13
Paid Up Additions Face Amount                   $3,666.00
Paid Up Additions Cash Value                          $575.52

2015 Dividend was $43.13
Dividend is set to be applied to paid up additional life insurance.  The agent told me when I took the policy over that this was the best option for me.  I'm not sure how my parents were having it applied, or what my other options really are.  It's a bit of a mess since I do not fully understand it, but any explanation or advice will be much appreciated. 

[Lukon]

Very interesting question and well done on laying out all in the information in a way that is easy to read and thorough.

The only help I can give you is a -bump- so it is seen by others with more knowledge. & I'm here to follow along and learn!

[Shor]

http://www.investopedia.com/terms/p/paidup-additional-insurance.asp

Basically, the dividend there is coming from the insurance company themself. They are making so much money from their premiums + lack of payout + investments that they are actually paying out a bit of money to policy holders, such as yourself.
Your two options for this are to either have it pay on additional insurance, or to reduce your premium. Additional insurance increases your net cash value if you cashout now (2637.82 (I think this includes the dividend additional)), and also the payout value in case you do die (25k + 3666) while the policy is in effect.

Your question is whether you should keep on paying the life insurance? Well, first of all, the dividend is not guaranteed. If a lot of people die, or whatever they invest part of their assets in does poorly, they will cut that policy dividend (and they will do it before they cut the shareholder dividend).
As you pay the premium each year, the cash value goes up by a portion of that. But, the [cashout] - [premium] will never surpass the policy payout amount, and of course, the only time you get the policy payout is when you die... so... there's that.

Consider simply: This costs you $200 annually. Saving that money and investing it, and compounding annually at 7% it will reach 25k after 32 years, but you're already 18 years in to it. (I'm not going to consider the stock market from 18 years ago since you weren't around at the time to be investing in such small amounts in the first place back then..)
Which means this policy will pay off if you die in the next 14 years.
If you don't die, it's costing you. If you do die, well, you won't care, you'll be dead.. Whether 'having more money left in your estate for others to mess around with' is important; that is up to you. Do you have family up or down that might need the money as you are no longer bringing in income?
If you cash out, you'll get some of that premium money back, yes, but you'll also be free of any further annual premium.

Also, the dividend might eventually some day get up to 200 annually. Right now its 43.13 / 196 which means the company will need a lot (lot) more in profits to hit the levels they're talking about (which again, are not guaranteed to stay).

[Frankies Girl]

My personal opinion is that whole life (especially as sold for insuring children) is a giant ripoff and you should absolutely cancel it and get whatever you can out of it.

Life insurance should be for replacing lost income when you have dependents until such time that they can support themselves. Children do not have dependents, but the idea that it is also sold as a hedge against a child's death (so you can afford a lavish funeral for your dearly departed) is ludicrous.

If you are now in your 20s, unless you have dependents (spouse/children) you have no reason to continue throwing money into this sub-par "investment" when you could take that same money and get a much better return by investing for yourself.

If you do happen to have dependents, you should look into term life insurance, which is going to be a cheaper for a much, much higher amount of coverage for a period of time - usually 10-20 years (the "term" part of term life).

The amount of money already paid into this whole life insurance policy is sunk cost, so if you can get anything out of it, I would consider it a bonus. But to continue paying $200/year for a measly $25K policy is a waste.

[FI by 2035]

Sounds like I was on the right track thinking this was not the best place to be putting my money.  I am going to look into cashing it out before the next premium is due.  I have a term insurance policy through work, and can also bump it up for a few dollars a paycheck, so I will do that when the enrollment period allows me to.  Right now I have no children and my wife and I both work full time, so my insurance policy through work should be sufficient.  We just got our student loans paid down to the point where the average interest rate is lower than our mortgage, so our savings rate will be jumping up quite a bit since we'll have a large portion of our budget freed up.  The plan is to just pay minimums on loans from now on, and they'll be paid off in less than three years, maybe faster if we decide to throw some of our overtime at them.  Looking forward to the time when I can say I'm completely self insured, but that's a ways off. 

[BTDretire]

If you need life insurance to cover a spouse especially with a child, then $25k will help a little but
only for a year. So it's not enough, IF you need in life insurance.
  My mother turned over the policy they bought on me when I had some Vanguard investments.
I took the cash value and put it in a Vanguard fund and never looked back.
 Life insurance is not a good investment on a child.
 If you can a afford a funeral, then there is no need to buy life insurance on a child.
Children are an expense not an income generator, life insurance is to replace lost income.

[FI by 2035]

My plan now  is to take the cash value and invest it after building savings back up a bit. We pulled some of our emergency savings to get the student loans paid down, but will have it back where we are comfortable within a couple months.
My financial situation is much different than my parents was, so I can understand why they thought it was a good idea at the time, and insurance agents cab be pretty pushy. I've had one trying to convince my wife and I to buy whole life policies instead of contributing to 401k, but I have no interest in that.

Thanks everybody for the advice. Always good to get some confirmation that were making a wise choice.

[notactiveanymore]

My plan now  is to take the cash value and invest it after building savings back up a bit. We pulled some of our emergency savings to get the student loans paid down, but will have it back where we are comfortable within a couple months.
My financial situation is much different than my parents was, so I can understand why they thought it was a good idea at the time, and insurance agents cab be pretty pushy. I've had one trying to convince my wife and I to buy whole life policies instead of contributing to 401k, but I have no interest in that.

Thanks everybody for the advice. Always good to get some confirmation that were making a wise choice.

Just wanted to throw out from personal experience that you don't have to tell your parents you're cashing in the policy. We cashed out my husband's whole life which his mom bought when he was 1 year. She had done a prepay options and was charging him for it as soon as he turned 18 (he sent her a check each month for phone/insurance). So we got him term life then cashed out his policy for about $4000 when he was unemployed so we could keep paying down debt. But he felt like he had to tell his mom. I'm not sure she'll ever forgive us. She treated it as if we were making a judgment on the decisions she made 28 years ago. And she was weirdly sentimental about it. Also she just kept talking about how if he gets cancer then he won't be able to get any more term life. It was a year and a half ago and she still brings it up regularly.

You know your parents, but I just wanted to toss out that since you're paying for this thing then it's entirely your decision to cash it in and you don't have to share that decision if you don't want.

[Dicey]

I completely agree with theotherelise. Zip your lip when you ditch it.

[FI by 2035]

I cashed out the policy, just got the check last week after waiting just over a month.  It's in savings for now but I'll be investing it after I do some research and decide where I want to put it.

[boarder42]

not much research to do ... vanguard VTSAX and keep on rolling