Author Topic: WWYD-Universal Life Policy  (Read 1318 times)

tthree

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WWYD-Universal Life Policy
« on: September 06, 2015, 02:05:10 PM »
Argh.  I keep forgetting that DH and I both have Universal Life Insurance policies.  We opened these a couple of years before the GoC came out with TFSAs.  (At the time my RRSP was maxed, and we were advice that a UL policy was the only other tax exempt way to grow $$).

So DH and I each have about $12,000 in our policies (through Industrial Alliance).  We haven't put much in since 2009.  The policy is close to the point where it is self sustaining (interest covers fees).  However, I have the feeling in the event of a tragedy, this money would be easy to access if in was in a TFSA vs. dealing with an insurance company.  WWYD?  How would I go about getting the money out?  What sort of fees would be associated? 

And yes I realize I could read through the 100 page book that came with my policy but I would prefer someone to explain it to me in English;)
« Last Edit: September 06, 2015, 05:44:14 PM by tthree »

MDM

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Re: WWYD-Whole Life Insurance Policy
« Reply #1 on: September 06, 2015, 02:14:57 PM »
So DH and I each have about $12,000 in our policies (through Industrial Alliance).  We haven't put much in since 2009.  The policy is close to the point where it is self sustaining (interest covers fees).
Another way of saying "interest covers fees" is "fees eat up all the interest."

Quote
And yes I realize I could read through the 100 page book that came with my policy but I would prefer someone to explain it to me in English;)
You'll want to determine how much you would owe in taxes if cashed out the policies now.

Then look at
After-tax cash-out money * (1 + r)^n  (where r is whatever return you assume you can get in the market, and n is the "expected" remaining number of years of life), vs.
Current death benefit value * (1 + i)^n  (where i the net rate at which the death benefit will grow, and n is the same as above).

What do you see if you do that?

tthree

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Re: WWYD-Whole Life Insurance Policy
« Reply #2 on: September 06, 2015, 06:56:19 PM »
After-tax cash-out money * (1 + r)^n  (where r is whatever return you assume you can get in the market, and n is the "expected" remaining number of years of life), vs.
Current death benefit value * (1 + i)^n  (where i the net rate at which the death benefit will grow, and n is the same as above).


Thank-you for the reply.  The first calculation I can handle. 

Now I am really going to how obtuse I am here…..but I am unsure of what "the net rate at which the death benefit will grow" means.  The policy is for $200,00 dollars.  It is payable at 100% based on the age at purchase. 

And I corrected the first post it is a Universal Life policy not a Whole Life policy.