We are finally dealing with our Universal Life Policies. We opened these in 2007, before Canada introduced TFSAs, and we were looking for another way to invest tax-free. We did make a couple of large lump sum payments in 2007/2008, and have largely ignored the policies since then, only paying the yearly premium a couple of times (and the other years letting it come out of the cash value in the policy).
Both UL policies are level cost. Guaranteed payout of $200,000. Mine is ~$45/month and DH is ~55/month. Right now the cash value of each policy is approximately $5,500. We each have term policies for $500,000. Only debt is mortgage of ~$190,000.
As I see it there are a few options:
(1) Keep the policy. Don't make any additional payments until balance is $0. And then make start to make premium payments, keeping the cash value at $0.
(2) Keep the policy. But cash out the $11,000 and put in our not yet maxed out TFSAs, paying way less in fees. Make premium payments keeping the cash value at $0.
(3) Cancel the policy. Take the $11,000 and put in our not yet maxed out TFSAs. Take the $1200/year premium payment and invest.
Please advise:)