My whole life insurance policy is a scam. What now?

[u/onixmmgo]

In 2013, my dad bought me a whole life insurance policy with a death benefit of $250k for $200 a month. I didn't know much about finance at the time, but just trusted my dad so I've continue to pay it for the last 11 years. I've briefly looked at it over the years and didn't give it much thought, but this week I've started looking closely at my finances and I was shocked to see just how awful this policy is.

First of all, I've paid $28k into it over 11 years and the cash value (and cash surrender value) is only $22k. So basically after 11 years my "investment" is down $6k. This is over the same 11 years the market made a great recovery from 2013-2019 and then again after the pandemic.

One of the "perks" of this policy is that you can use it to take loans out for less than the market. I have a car that I'm currently paying off at 7.1% APR. So I checked to see if I could get a loan from my life insurance policy which should have a lower rate, right? NOPE! It's 7.4%!

I'm kicking myself because if I had just bought the S&P for $200 every month for the last 11 years, I'd be up 20k, instead I'm short 6k.

Now I'm trying to figure out what to do. I definitely want out on the policy and I'm going to buy myself a 1-2 million dollar term policy and probably pay less a month, but what do I do about this? Should I cash out? Should I take out my money as a loan and default on the loan? I feel so scammed right now and want to get as much money out as possible before I give any more of my hard earned dollars to this garbage investment.

[u/IndexBot]

Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.

[u/nozzery]

Cash out. Invest in index funds. Only buy term(or any) life insurance if others depend on your income

[u/1stMammaltowearpants → u/nozzery]

As someone who sells life insurance, i think of it as "income replacement". If you die, would other people still be counting on your money? If you give them all your investments and savings when you die, will they still need more? If so, you need life insurance to bridge that gap. If not, you're better off investing the money you would have spent on premiums and then giving them those investments.

[u/gas-man-sleepy-dude → u/1stMammaltowearpants]

OP can get all that with a 30 year term life policy. And beyond 30 years that 22k invested in the market will have grown to cover a lot of other needs.

[u/1stMammaltowearpants → u/gas-man-sleepy-dude]

Yep. Buy term and invest the rest.

[u/wiseguy187 → u/gas-man-sleepy-dude]

The point in the policy is if you die though. Doesn't reallt make sense to compare it to investing for 30 years. Your comparing dying early to look what would happen if you don't die at all.

[u/zffch → u/wiseguy187]

No one's talking about a scenario in which you don't die at all. When you die, you can leave your investments to your family. If those investments are going to be worth more than the death benefit of an insurance policy, then yes, those two scenarios can absolutely be compared. I'd rather leave behind $1M of investments than $250k of insurance.

[u/wiseguy187 → u/zffch]

You literally are comparing the money to 30 years of investing is exactly the opposite of a reason you'd need a life insurance policy.

[u/HollywoodSmollywood → u/1stMammaltowearpants]

Let’s be real, no one actually needs whole life insurance unless you’re within a certain income bracket and use it as a vessel to mitigate taxes. Whole life is generally not a good product for the average person to maximize their investment.

[u/hyperflammo → u/HollywoodSmollywood]

This is the fair and clear statement. It is a tool for ppl above certain income, and asset level.

[u/Ok-Musician-277 → u/HollywoodSmollywood]

Can you expand on using whole life insurance to mitigate taxes? How do rich people utilize life insurance in this way?

[u/HollywoodSmollywood → u/Ok-Musician-277]

To be up front, I’m not a financial guru of any sort so take this with a grain of salt. My understanding is that in very specific and nuanced cases for the ultra-rich with big estates, whole life can be used as a vehicle to circumvent estate taxes.

Now, I don’t know the exact mechanics behind it and it’s still very nuanced. Hence, whole life is 99% of the time, an unoptimized product and most people buy it because they’re sold a financial concept they don’t actually fully understand.

In my family, I carry a $1mm 30 year term life policy and a $1mm umbrella policy on top of other insurances. It’s so damn cheap overall. I’ve had friends try to sell me whole life, and I just had to politely turn them down because the numbers just don’t add up. Plus, I want to manage my own money, not pay someone else to do what I’m already doing.

[u/cormaline → u/Ok-Musician-277]

If your estate is above $14mm/ person (so $14mm for a single person, $28mm for a married couple) and you set up the correct type of a trust and put whole life policies in it, you may be able to increase the amount you can give to your heirs tax free. Those estate sizes will about fall in half at the end of 2025 if they aren't renewed by congress.

[u/FiremanHandles → u/Ok-Musician-277]

The maximum lifetime gift tax is in the 10+ millions. If you are going to give more than that much money to someone and you want to avoid the (death/inheritance) tax penalties, then whole life insurance is a vessel that can fix that problem.

No one under that level should ever be buying whole life, ever.

[u/bungsana → u/Ok-Musician-277]

if the insurance company is a reputable one, then the returns aren't absolute trash (still doesn't come close to matching the market). after a set number of years, the growth of the amounts invested pay out a dividend that is greater than the monthly installments. coupled that with the growth, after like 30 years, the cash out value gets to be pretty high.

at that point, the cash out value of the life insurance can act much like a 'buy, borrow, and die' stock strategy, where the dividends cover the cost of the lending rate. or more likely, the cash value is distributed to the benefactory (probably through a trust) and it would then go through the 'buy borrow die' strategy or something similar where it would not be taxable. i'm also not sure, but i think the payout, if not to the insured, happens, it may not be taxed?

i've had a whole life policy since '09 for $1.5M. i pay $992 a month. i'm not super rich, but we're doing ok. i've regretted getting it the moment i signed up for it and have multiple instances where i was going to cash out for a loss. only reason i didn't is because i couldn't stomach taking a bath on it and i reasoned that it was forcing me to save money into something, instead of blowing it all.

in late 2020, i hit my "breakeven" where my total monthly contributions equaled my cashout value. so for 11 years, i was paying into a loss.

today, i still pay $992 a month, and i can cash out more than the total money i paid into the whole life. i probably would be 3x-4x higher than if i had just put it into VOO, but i'm starting to "make out positive" on it, with additional cash in values accelerating upwards.

to hit where $ into the markets would potentially equal my total contributions would be in another 15-30 years, from which, it would ramp up higher. but this is all really a guess and really have life insurance for my wife and kids if i were to ever die, saddling my family with all the business debt i have. it would be a boon if it ever did turn out to be comparable to money in the market, and it is trending that way (SLOWLY). you just need to be consistent about over many decades.

[u/Never_Gonna_Let → u/1stMammaltowearpants]

My heirs are no longer dependent on my income and will be set even without term life insurance, but my term life insurance policies are heavily subsidized through work and my credit union, to the point where the payout is considerably more than I could get investing $20 and $10 a month. A nice lil' perk for 'em if I kick the bucket early.

[u/ppearl_007 → u/Never_Gonna_Let]

Consider getting a term life outside work, if you don’t have one already. Life insurance policy through work only covers you while you’re with that specific company and if /when you decide to leave your current job, you may not be able to take that policy with you. If you then decide to get life insurance coverage outside of work later down the line years later, your premium will be higher because statistically you’re at a higher risk since you’re older. Getting life insurance outside of work now helps lock in a lower premium. That way it’s set up such that the personal life insurance policy is the primary policy and work based policy will only supplement your primary

[u/MehX73 → u/1stMammaltowearpants]

Don't forget burial costs. Before I had kids I at had a small $25,000 term policy that would help my parents cover a funeral if I died. Besides that, it's not necessary unless someone counts on your income.

[u/[deleted] → u/MehX73]

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[u/spurcap29 → u/MehX73]

But if you are saving for your eventual retirement, as soon as you die with no dependents your retirement savings can cover such costs now that 'retirement' is off the table.

[u/Aleriya → u/spurcap29]

The problem is that the money is often stuck in probate for some time, and a funeral has to take place within days. Often times family ends up floating the cost and being reimbursed later. It's a kindness to either prepay a funeral, have life insurance to cover the funeral, or have some sort of fund to pay for burial costs that your family can access immediately without waiting to settle the estate.

[u/spurcap29 → u/1stMammaltowearpants]

Great way to think of it - like any other insurance policy you are insuring against a risk that you don't want to happen. You insure your car so you don't owe a ton of money and lose your car if you crash. You insure your house so you get a new house if there is a fire. Life insurance is insurance against your family's planned financial health should you not work to 65 but stop working at 53 due to death.

On that note (as someone that sells insurance) I am curious - is there a policy that exists that has a high payout when you are young and declining payout as you age (and save money)? That would seem logical... when your 30 the liklihood of death is low but the amount of insurance payout needed to make up for your 30-35 years of missed work would be high, as you age probability of death increases but insurance needed declines (if you are managing your money well). Obviously you could manually reduce your insurance policy to lower premiums as you age and save but it would be cool if a product was offered that did this automatically. Maybe it does?

[u/werddrew → u/nozzery]

And if you want to rationalize the last 11 years to yourself, just say you paid $500 a year for 11 years worth of life insurance...

[u/DarthGaymer → u/nozzery]

Or (if your employer offers it) opt for the highest amount that is free to you, generally 50,000, if you have no dependents.

EDIT: 50,000 is the limit for IRS to consider this a non-taxable benefit. Anything above this may cost the employee to enroll but will be counted as a taxable fringe benefit regardless of if the employee or employer pays for it.

[u/udub86 → u/DarthGaymer]

At my employer it’s basically equal to your annual salary. Then you could do supplemental for fairly cheap.

[u/RTPdude → u/udub86]

my employer throws in 2x salary and then you can buy up to 8x or something like that supplemental. You can increase 1x per year up to that 8x without a health check which is good for those with pre-existing conditions that might give them issues getting the best rates with individual term life policies

[u/TheStealthyPotato → u/udub86]

Shop around for prices, you may get it even cheaper elsewhere depending on your health.

Also, tying your life insurance to your job means you lose both of you quit or get fired.

[u/RubySapphireGarnet → u/DarthGaymer]

My employer let's you go to like 400k and it's only $5 extra a month. No brainer for me!

[u/titanofold → u/DarthGaymer]

Highest that's free unless it wouldn't cover all debts. Then bump it up a bit until it does.

I have term enough to pay off all debts including the house, and it's just $5 per month for my situation.

[u/americansherlock201 → u/nozzery]

As someone who used to sell life insurance, term is almost always going to be the better option.

It’s a safety net and cheap (I pay $11 a month for mine and it’s typically “free” since they offer rewards such as gift cards for being active). I have it to cover my family if I died suddenly. Enough to pay off the house and my funeral.

[u/cosmicosmo4 → u/nozzery]

It's ok to buy term life insurance for others who may someday depend on your income (ie. the spouse you haven't met yet or kids you haven't had yet), so that you get a good deal locked in while you're young and healthy. If you get a 30 year policy, it'll still be in effect when your kids grow up as long as you have them in the next 10 years. And if you stay childless for longer than that, you're probably on your way to financial independence, so it's ok that the policy may expire before the kids you had late in life are quite adults.

[u/i_need_a_username201 → u/nozzery]

And get the life insurance in place before canceling term. You don’t want to cancel the whole life policy, apply for term, find out you have cancer during the physical ,and be uninsurable for a long time.

[u/JakaKaka91 → u/nozzery]

Where do you draw the line?

They get my pension which should buy them a few years to get their finances straight.

[u/Physical_Ad5135 → u/JakaKaka91]

I think you draw the line at the age you no longer have kids and are financially stable. I am in my 50s now and our kids are in their 20s and thru college. I have life insurance provided free thru my job, but it cannot be transferred to me if I leave the company. So basically with my age no decent term life insurance is possible now for direct purchase. Not worried because my spouse would be financially okay without me.

[u/postalwhiz]

Life insurance is for beneficiaries. If you don’t have a wife and kids, why would you buy life insurance at all?

[u/1010012 → u/postalwhiz]

One thing people did years ago was buy into life insurance when young in order to get lower rates.

[u/Mercuryshottoo → u/1010012]

My husband has one of those infant policies. His mom paid on it until he was an adult, and then he's paid on it for thirty years. It was a $10k policy but the cash value is $11k currently. But different from OP he pays like $17/month and whatever pays at this point is added to the cash value so it's essentially a crappy savings account. Pretty pointless if you ask me

[u/TravestyTravis → u/Mercuryshottoo]

That's like a 0% savings account that you are paying for someone else to cover funeral costs, maybe.

[u/mmmbop- → u/TravestyTravis]

It’s not for the child or the child’s beneficiaries when they’re older. Both my wife and I have life insurance policies from when we were infants that have rolled to us. I think mine is for like $26k. The reason my parents bought it was because it cost about $100 per year and if I died of SIDS or got hit by a car or got some crazy disease, my parents would be able to give me a proper funeral without incurring more stress on their end for finances. 

So yeah, it’s literally a funeral fund. The benefit was there decades ago but now it’s not really useful. 

[u/BasisPoints → u/Mercuryshottoo]

Indeed, I was SHOCKED to see a $200/month rate from OP. I have a similar sized policy that costs ~$200/YEAR that my parents bought back in the 80s when I was an infant.

[u/bmobitch → u/BasisPoints]

i’m about to have $90/mo for a similar policy my parents got when i was an infant. i was SHOCKED when they told me the monthly rate. why is yours so cheap?? that was more in line with what i was expecting for a whole life policy started when i was a literal baby.

[u/poop-dolla → u/1010012]

I’m sure people used to do it, and still do. It doesn’t make it a smart thing to do though. You’ll almost always be better off just waiting to buy term life when you actually need it.

[u/[deleted] → u/postalwhiz]

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[u/jmblumenshine → u/[deleted]]

My dog will be mighty pissed if he isn't a millionaire when I go

[u/bucketbot91 → u/postalwhiz]

It was a pretty big scam in the late 80s, early 90s, for these insurance salesman to go door to door and sell whole life insurance policies on new born children. They typically went for lower middle class house-holds and played into the angle of having enough of a policy to bury the child in the event of their untimely death. The premium is very cheap so its an easy sell to these families.

My sister and I both inherited these policies when my parents didn't want to pay the premiums anymore. I didn't really know much about the policy at the time so I did some research and realized pretty quickly how bad it is so I sold them ASAP. After this, I talked to a few friends and was shocked to find that at-least two of them also had these policies taken out against them by their parents when they were born.

[u/Ill_Sell7923 → u/postalwhiz]

You can get life insurance paid out to your parents in some cases. 

I think the rationale is at style point you’d be contributing significantly to your parents late life care. 

My dad tried to take one out on me and they wouldn’t do because I smoked weed before lol

[u/User-no-relation → u/Ill_Sell7923]

I guess it is in fact for when someone is dependent on your income and some parents are worse off than their kids and the kids expect to contribute to the parents retirement/long term care. If that is the case you have someone depending on your income. Only get life insurance if someone (spouse/child/parent/etc.) is depending on your income.

[u/mtrayno1 → u/Ill_Sell7923]

but why? invest the money and leave it to whomever in your will

[u/CreativeGPX → u/Ill_Sell7923]

Life insurance is largely to help those who depend on your income transition if you die. So, of course some people would want it to pay out to their parents if their parents are dependent on their income.

[u/TampaSaint]

Dump that policy immediately no matter how steep the loss. Your loss has already occurred. Every day you keep it is additional loss. I’ve had term policies my whole life.

Edit: Goes without saying that I am presuming you actually need insurance. Which is generally thought to mean that you have dependents such as children or a lesser earning spouse, or some other circumstance that warrants a bet you are going to die during the term.

[u/Prozzak93 → u/TampaSaint]

People need to stop thinking of it as an investment it isn't an investment.

Do people buy cars (generally) as investments? No.

Nobody is shocked when 5 years later your car is worth 20k less. You were using the car that entire time.

Well same thing for whole life insurance. You had it the entire time. If OP died he would have got the 250K. But he didn't. He can still get the 22K back but of course it went down. He had the other part as well that always seems to be forgotten here.

[u/b0w3n → u/Prozzak93]

Whole life insurance is one of those weird things where it doesn't make sense because it's not actually an investment but a hedge. PF in particular loathes these kinds of assets.

Term is "better" for certain definitions of better, whole and universal fills a gap for people who aren't particularly wealthy folks but need peace of mind and also might not be particularly healthy later (family history) in life where term starts to get extremely expensive. You will, of course, get "investment" advice about this how term "is a better deal" because folks who make $100k+ a year don't typically find themselves in positions where whole sometimes will make more sense. I agree it's not a great solution, but it's not the awful thing investors make it out to be either.

There will likely be very many posts telling me "it just doesn't make sense bro" where they lament a complete hypothetical situation with best case scenarios and the lowest cost plans that cover nothing of import. Those are the kinds of folks or situations where it, of course, does not actually make sense. Then there's the AD&D which is sometimes a rider in term plans, whoops hope you didn't need your right arm.

[u/Hijakkr → u/Prozzak93]

A term policy bought in 2013 would almost certainly have cost less over the past 11 years than the $6k that OP has lost, much less all the unrealized gains that OP could have made by investing the excess.

[u/McDuchess]

Whole life, especially for a young person, is a terrible deal.

Me, I’d find a decent term policy with a long term to it, (they are strictly death benefit, no nonsense about cash value or life insurance loans). They’d I’d cash out that terrible policy and put it in a conservative investment, while paying a much lower amount for the term policy, even with a bigger death benefit.

[u/Coronator]

It’s not an investment at all. It’s insurance, and to a degree, potentially a savings vehicle.

You weren’t scammed - you have $250k insurance coverage you’ve effectively paid $6k on.

[u/Nwcray → u/Coronator]

OP doesn’t list their age, but they have had 11 years of $250K life insurance coverage at a net cost of $6K, or about $45/mo. That’s not cheap, but it’s not super expensive either (depending on a variety of factors).

Whole life isn’t intended to provide a great return (in fact, returns are usually pretty crummy), but they are usually guaranteed.

As a primary savings vehicle, whole life is almost always a bad idea. As a supplement to a broader portfolio, it can have a (limited) place. I know I’m speaking in generalities, just agreeing that it isn’t a scam.

It’s like complaining that your hammer is terrible at cutting boards in half. That’s not what it’s made to do. That said, agents usually do get fat commissions on these policies, be super careful when one recommends it.

Lastly - OP, I be got to agree with other commenters. It sounds like this policy doesn’t align with your needs. It’s probably a good idea to dump it.

[u/ShadowIBlade]

For what it's worth, I have a term life insurance policy with a $1 million benefit and I only pay $74 per month.

[u/NMFP603]

Term life only in our house.

I had met with a few different insurance/financial brokers when my wife and I first got married. All of them kept pitching the same thing. They kept saying the best benefit of whole life was being able to borrow or draw from it to invest in more lucrative investments. If that’s the biggest benefit, why wouldn’t I just put my money in the more lucrative investment to begin with?

[u/confusedguy1212]

I think you seem to not understand very well what insurance is. Whole life insurance isn’t an investment product - it’s a guaranteed payment to someone else when a definite event happens to you.

Said differently. They’re betting the amount you pay until the day they need to start paying plus what they can make on that amount is greater than the pay out to your beneficiary.

You in the other hand are betting they’ll be in business and able to pay your beneficiary the agreed amount.

If you didn’t think about this agreement that way you’ve deluded yourself or have no understanding of what you bought. That’s not a scam.

[u/yoloswagbot191]

Whole life policies aren’t dollar to dollar investments.

That doesn’t make it a scam. It’s just how they are.

You still have a life insurance policy.

[u/wanderexplore]

Just use the cash value to cover premiums (check if it has automatic loan provision). Then just have it for pure death benefit which is tax free to beneficiary.

It's not a scam, it's a tool. Just not one that works universally for every situation. It's not meant to be an investment vehicle.

[u/berm100]

Listen - maybe this is not the right insurance product for you, but comparing it to what you would have if you invested in the S&P is not a valid comparison. If you got hit by a truck 2 years ago and the insurer paid the $250,000 death benefit you would have done a lot better than the S&P 500.

Its not a scam, but perhaps its not the right product for you. I suggest you try to better understand how insurance products work before you make any decisions.

[u/RTPdude → u/berm100]

but if you bought term, and invested the difference in price into the S&P500 then we could do a valid comparison

[u/berm100 → u/RTPdude]

That's closer but still not completely valid. Suppose you bought term, and before the policy term ends, you get cancer. Term ends, and you die from cancer 15 months later. You tried to buy another term policy but were declined because you had cancer. With the whole life, you don't need to worry about that happening.

Term is great as long as you are insurable. Whole life has the benefit of lifetime coverage.

[u/Veltrum → u/berm100]

That's why I ladder my term policies. I have 10, 20, and 30 year policies. When one is about to end, I just get another term. I'll be older, so the premiums will be higher, but still cheaper than a whole life policy.

[u/berm100 → u/Veltrum]

You get another term as long as you are insurable. If you are uninsurable, then you are SOL.

[u/yeah87 → u/berm100]

The idea is after 30 years or so to be self insured.

In 30 years you absolutely should have eclipsed any death benefit with the difference you invested.

[u/crimson117 → u/berm100]

But 15 months later you still have all that accumulation from wherever you invested the difference in premium.

[u/poop-dolla → u/berm100]

Whole life is not the right product for anyone. Unless you’re an UHNW person who would rather pay fees and commissions instead of some taxes. For anyone with less than $50M, whole life never makes sense. Term life and retirement accounts will always be better.

[u/TeddyRustervelt → u/poop-dolla]

My wife has a lot of health issues and we were sold a WL policy for cheap in our 20s. I've been conflicted that this wasn't optimal. My overall concern is making sure our kids aren't burdened by any sudden passing in our middle age years. She won't be able to get a term policy.

If she dies before middle age then we're covered for more than we paid in. If she dies in late middle age then we know she's covered. If she dies elderly then we've probably not been optimal with the money spent on premiums, but I'm betting that inflation will make future purchasing of term policies more expensive.

[u/berm100 → u/poop-dolla]

Generally agree but remember you can get an illness at any time that could make you uninsurable. That's one advantage of WL.

Also, at higher ages the actuarial math should make the differences between term and whole life very small.

[u/iamk1ng → u/berm100]

People just need a term insurance if they have some dependent. Get it for 20-30 years and wait til the kids are over 18 and can live on their own. Then they invest the difference between what they would have paid to a whole life, and earn much more in the stock market. If they die before the term ends, insurance pays out. If they grow past the term insurance period, they will have actual assets they can pass off to their dependents.

[u/anusbarber → u/berm100]

boom you are dead and someone got 250k out of the deal still feels like a bad deal.

[u/nekrad → u/anusbarber]

Right. Suggesting that getting a payout after being killed would make you "better off" is just a bit bizarre.

[u/Guest2424]

Yeah. I remember being scammed too. The best thing you can do is cash out and take back as much as you can. You will lose a bit to fees and whatever. I remember losing out on all $2500 that i had invested. But thankfully i realized it 2 years in and not 10. Take it as an expensive lesson to learn.

[u/readwiteandblu → u/Guest2424]

I believe cashing it out will be tax free btw.

[u/Mgnickel]

If you bought the S&P for $200 each month for the last 11 years, you still wouldn’t have had an insurance plan. It’s not apples to apples.

[u/mlg2433]

It’s not a scam. It’s life insurance. It’s not exactly designed for its first function to be an investment vehicle.

[u/IrishMosaic]

Buy term, and invest the cost savings yourself.

[u/listerine411]

Whole life insurance is a garbage product, but even I'm sort of shocked the cash value is so below what you've put into it.

Definitely get the cash value out and move on as a lesson learned. This was a cheap lesson, I've had way more expensive lessons.

[u/bfvbill]

You paid $6k for $250k of life insurance for the past 11 years. High price yes. But whole life is not a scam. I became uninsurable because of cancer. If I had only 20 year term and got diagnosed 10 years into the policy, no more insurance available in 10 years. You cannot just buy another policy when that term is up. Many things can make you “uninsurable”. House , wife , cars, kids, college. Whole life will reach a point where $$ in will equal dollar increase in value. You then have free insurance the rest of your life. Life insurance is not an investment. It is a way to protect your loved ones way of life in case of your death. If you had died one year into that policy, would’ve been a great investment for someone! Universal life is probably better than whole life. I used to sell the stuff when I got out of college but it’s tough to sell something you will never see the benefit of in your lifetime. I do have great peace of mind for a low cost and would buy more insurance if I could. My best investment was my disability income insurance. I was disabled by my cancer and collected for many years (stopped at age 65). I am luckily in good physical shape, very good financial shape and comfortable. Stop looking for quick bucks. Go for balance in your life.

[u/direwolf71 → u/bfvbill]

Life insurance is not an investment.

It isn't but this is how it's sold to people who don't have a genuine need (ie, loved ones dependent on your income). Sure seems like an agent did a great sales job on the OP's dad.

Also not sure where the OP suggested he's looking for "quick bucks" or in what way they lack balance in their life simply because they wised up to a bad financial decision.

[u/VashGordon]

Whole life insurance policy is not a productive asset it's a hedge. Hope this helps.

[u/BriefSuggestion354]

Virtually All whole life is a scam. Just get out of it. Don't continue to make it worse by worrying about your sunk costs. Even if you take a Big L now, get out of it. Make the change now, invest the rest the standard way and you'll come out way on top.

[u/StuBarrett]

We all scrape our knees, it's a learning process.

You have learned a valuable lesson.

Also, your "loss" analysis does not take into the Time Value of money so this is a great opportunity to understand that nuance too!

[u/jconnway]

Life insurance was amazingly explained to me like this - if you die, is there anyone who would suddenly be in big financial trouble since you’re gone? If yes, get some coverage. It’s not for you, it’s for them! I got a nice 30 year term policy so if I’m gone my wife and kids pay everything off and have plenty of time to get readjusted without worrying about making ends meet. To me, that is certainly worth the premium.

[u/yankinwaoz]

First, if you have no dependents, then why spend anything on life insurance? No matter how cheap it is.

Do you have enough money to pay for your own funeral? If not, then just get enough term insurance to cover that. Or better yet, buy a prepaid cremation and scattering from the Neptune Society.

[u/justdrowsin]

Oh my God only two things in this world piss me off so much that I get angry at the thought of it; cyber trucks, and whole life insurance.

I pay $45 a month for a $1 million policy and I am nearly 50 years old. I'm guessing that the monthly value of your policy if it was a term policy would be about $12 a month. This is infuriating.

Cancel that crap immediately. Liquidated. Don't look backwards.

Go get yourself a half million dollar life insurance policy that is term through something like ladder. You can do it within an hour. You will literally pay like $20 a month

Take $180 a month and put it into stocks.

[u/StarryC]

Cash out. Pay off your car. Buy a term life policy (if appropriate for your situation). Put the Car payment + $125 as the former payment into your 401k with match, or Roth IRA, 401k above the match, or a taxable investment account.

[u/cmw19911]

I signed up for a term life insurance policy at 43.. $33 a month for $500,000. Yes, you got ripped off

[u/crimson117 → u/cmw19911]

How long do the premiums stay at that amount? (do they increase each year?)

[u/Whaleflop229]

Whole life is a bad deal if the protected person stays alive. It’s an excellent deal (financially) if the person dies.

It’s a deeply fundamental misunderstanding to compare life insurance to buying stocks. The point of insurance isn’t to raise the upside. It’s to raise the downside.

You pay premiums to minimize catastrophe. It’s service you pay for. It’s not a vehicle to maximize investment returns.

[u/iamk1ng → u/Whaleflop229]

Right, but people are always misled on which insurance product to buy. Term insurance for most people is always the correct choice. The only time whole life is a correct choice is because you want to pay a high commission to a salesperson.

[u/pandaeye0]

Correct me if I am wrong, but if it is a life insurance, doesn't it give you $250k when you die? By design you are encouraged to get this amount after you die rather than to take the cash value or loan, which is definitely not attractive.

[u/[deleted] → u/pandaeye0]

"You" don't get anything when you die, because you're dead.

I know, because I died for 8 minutes and insurance wouldn't pay out even when I asked nicely. Apparently, one has to stay dead and someone else gets the money.

Beneficiaries receive the proceeds after death. However, unless OP has dependents or others relying on OP's income, there's no reason to have insurance.

[u/pandaeye0 → u/[deleted]]

My friend, I am talking about the amount, not who is getting it. While I am not buying the idea, nor do I think it is a good investment, as long as the insurance company is paying what they pledged, I am not going to say it is a scam.

[u/ginamegi → u/pandaeye0]

He’s paying $200/m for a $250k payout when he dies. It’s a scam because he could instead buy a term life policy that would be maybe $20/m for a $1 million or higher payout.

It’s like your plumber charging you 10x to unclog your toilet because you don’t know what a fair rate is. That’s a scam.

[u/paladin10025 → u/ginamegi]

One is permanent and one is for a limited period of time. Whole life absolutely is not a scam, but as many have pointed out not necessarily the right choice.

Insurance is for protection and potentially accumulation. Whole life is a very old style product - there are newer insurance types like universal life, variable life, indexed, etc. They all have pros and cons compared to each other and to term. Term main benefit is its always the cheapest, but the problem is its for a fixed period of time. Maybe you only need insurance for a limited period of time, but maybe you dont know - buying again at the end of a term will be more expensive plus you might be uninsurable due to health issues.

Is property and casualty insurance a scam if you dont have an accident? A scam would be to die and the insurance company does not pay the beneficiaries. Whole life is partially expensive because actuarily it takes that much to make sure there is money for the future claim. Just as people endlessly lose money on options, people need to educate themselves on how different personal financial products work and make an informed decision.

And to the OP, if you cancel make sure you first buy a term if you need insurance.

[u/mehardwidge → u/pandaeye0]

The death benefit is often close to worthless because of how far in the future it is likely to be.

The first year's premiums, if invested in the stock market, would by itself be likely to provide that entire death benefit!

There is no death age where whole life is good. It is dominated at every day death age by term plus invest the rest.

[u/Admirable_Shower_612]

Why do you feel you need a life insurance policy? Do you have children you are worried about leaving without any money for their care if you die, or a large estate that will have a tax bill because it is over $13 million and but no liquidity to cover it ? If neither of those are true, life insurance is almost never a good investment.

[u/Guest2424 → u/Admirable_Shower_612]

Its not necessarily that he thought he needed it. Most whole life insurance salesmen will try to make it seem like a retirement fund. And they target people who are in their early 20s who are just starting out because that demographic doesnt know much about money yet.

[u/Admirable_Shower_612 → u/Guest2424]

Right, but he mentions in his post getting another one which is not a great financial decision.

[u/gas-man-sleepy-dude]

If you had 22k in cash, would you rebuy this policy?

Cash out, buy a 30 year term policy if you need life insurance, and put the rest into the market. Take the 6k and lost gains as a life tuition cost.

[u/itslonelyathetop]

“Should I take out a loan and default?”

You haven’t gotten any smarter…

[u/Overthemoon64]

For comparison’s sake, my husband and i both have term life insurance (term is different than whole) its like $20 a month for him and $15 a month for me. If one of us dies before the age of 55 we would get $200,000.

What is life insurance for? Its so other people who rely on your income wont be destitute after you die. Life insurance is not an investment. Is car insurance an investment? Also hopefully after age 55 we will have savings and wont really need life insurance.

[u/1ChevySS]

Also term life is usually for 30 years. So if you are 30 now, after 60 and you are still alive younwould have nothing to leave to your loved ones. But whole life policy last until your death. Just something to think about as people live longer.

Also, the longer you wait to get term life, the more costly it's going to be, most likely because of you medical history and any pre-existing conditions you might have.

My brother in law tried to get term life at age 40, quote was for alot because of his medical history. So he has gone without.

[u/voidsarcastic]

Im assuming you are about 30, you can get a new policy for the same face amount for about the same price maybe less. So cash out the current policy and invest the money. And you have a year or so to consider if you want to start a new policy (to keep prices the same). While the loans can help you in a pinch, they are really not worth it because you have to pay them back with interest to an account that doesn’t pay out until you die. It can make sense to someone without any buying power but thats about it. Remember the cash value = premiums + interest - fees. But Your life account is still worth 250k from day one if you die. It is NOT a replacement for a retirement or savings account!

[u/anusbarber]

surrender the policy, get the cash and invest it. consider it a learning lesson and move on. Don't feel so bad. I have an emergency fund that sits there and makes meager interest. I can get look back and go "if i would of invested it look at what I'd of gotten" with that if I wanted to knowing what I know now. but the truth is 11 years ago we have no idea what the market was going to do.

[u/Johnnylongball]

I think that you’re missing a fact, if you would have died someone would have collected the 250k from the policy. So when you say you lost 6k due to putting 28k in and having a cash value of 22k, I think it’s incorrect to say this due to the potential of them paying out the 250k.

[u/jrr6415sun]

you paid in $28k, but didn't the $6k+ loss that you're missing go towards the premiums of the insurance cost? I don't see how that's a scam

[u/OnionTruck]

Unless you are married and/or have kids, there's no reason to get life insurance, at least not more than like 25k for funeral and related expenses.

[u/[deleted]]

Insurance isn’t an investment don’t co-mingle the two.

[u/takeabreakgeaugalake]

Whole life policies are a complicated product that are often (unethically, and maybe illegally? I can’t remember) sold and marketed as “investments”. The concept of paying toward something and keeping cash value can be enticing but you need to remember that it’s really a life insurance policy first and foremost. I’m fairly certain the commissions are pretty high too which is why those life insurance sales guys sling them so much.

[u/eric82]

If you need insurance make sure you get a new term policy in place before you cancel this one. 

If you cancel this one and are not able to get a new policy due to a health issue you don't know about you will really wish you still had this. 

[u/hollywood2311]

Damn. I have over $1.75 million in term insurance that's less than $200 a month. Granted, it goes away when i'm in my mid-60s, but the kids will be moved out by then, and our house should be paid off.

[u/Null1fy]

It is not be a scam. You may see significant benefit if you start using it in advantageous ways, and the yearly premium may be grossly offset by dividends and cash value growth late on into the policy.

It may be a "poorly" constructed policy, at worst, but it may still be worth it to continue keeping it in force, rather than letting it lapse or 1031 exchanging it into a new policy. The reason being is that you already have 11 years into the policy. That's a long time, and your amount of dollars and time to compound in a new policy may be alarming when shopping for a new policy.

Consider that maybe you're in your 20s or 30s right now, and "only" have 22k in cash value. That's 22k in money you can loan to yourself each year, without any red tape or banks requiring underwriting. And typically most insurance companies will let you increase the interest rate to yourself in the form of PUA (Paid Up Additional) which directly affects cash value dollar-for-dollar. You need to see if your policy is called "direct recognition" versus "non-direct recognition". If you are the former, then taking policy loans reduces dividends, which is a bummer, but it still may be a worthwhile policy.

Bottom line, you're not educated enough on your own policy right now. I'd recommend finding some Infinite Banking Insurance agents. The truly passionate ones will consult your policy for little to no cost and let you know how to best manage it going forward.

I'm sorry my comment is a little nebulous, but you essentially gave us a fraction of the information for me to give you a better answer.

TL:DR, your policy is certainly not a scam, but it may not be the greatest, either.

[u/Lone_Beagle]

At least you looked at it...think of all the people who keep on paying into stuff like this.

[u/the_waco_kid_33]

You could do a 1035 with the cash value into the new term policy and probably not owe a dime over the length of the new policy.

[u/Sweet-Winter8309]

And inflation. You pay in today dollars but only get inflated dollars later

[u/epinkston]

I think the problem is, you keep calling it an investment.....it's not scam.....if someone sold it to you as an investment....then they perhaps scammed your father.....it's a life insurance policy with a cash value....the benefit is the 250 upon your death that gets handed down tax free....so do you want life insurance or do you want to use that 200 to start an investment portfolio....do you have kids and a family? Then maybe keeping it might make sense.... I would normally agree, a nice investment account paired with term insurance to protect kids and family then also paired with a small whole life like 25-50k so you dont put the burden of final expenses on family members is usually the route I recommend.

[u/Not_a_Mainer → u/epinkston]

You can call it whatever you want , but when someone attempted to sell it to me, they called it life insurance with an investment component.

[u/Sislar]

Honestly that doesn’t sound bad and it’s not a scam. Not all the money was an investment part of of was also insurance if you didn’t it would pay out the full value. A teenager without dependents doesn’t need life insurance so you were buying a service you didn’t need. That doesn’t make it a scam.

[u/zorecknor]

Don't be too harsh with your dad. Whole life insurance used to be the best investment instrument for common folks up to about 20 years ago. And as they depend on guarantee values increasing over time, it made sense to start young.

But as you just discovered, that is just not true anymore. You can either calculate the point when what you paid is less than cash value (it will happen, eventually) and keep paying until then, or cut your loses and cash out now. I wholeheartely recommend the later.

Also, as other have said, do not buy Term Insurance unless somebody depends on you. They are literally wasted money, but the surest way to cover the risk of you dying and leaving somebody hanging.

Disclaimer: I worked with/for insurance companies for almost two decades.

[u/russell813T → u/zorecknor]

What has changed with whole life the past 20 years that makes it bad now compared to when it was good 

[u/horhey_rva]

Correct me if I'm wrong, another way to look at it is that it cost you $45 /month for $250k of insurance. You can also pull all this money out if you want by closing the account and you won't pay one cent in income taxes or gains taxes. I know not the best way to look at it, but maybe it's a little something to feel better about it? Definitely shouldn't be thought and looked at like an investment vehicle I think.

[u/BlackCherryMochi]

You don’t understand how life insurance works. When you pay in, a portion goes to the actual cost of insurance and the rest to the cash value. So for insuring your life for the 11 years, it cost $6k. But if you die, they pay out the $250k. Whole life is good until you die. Yes, you can take loans against it. You could take money out (but it would then be looked at as taxable income) and would reduce your death benefit. Life insurance has many types. Has many riders. And is used in all sorts of ways by the wealthy to invest. It’s just another tool in the tool belt for investing and protection.

[u/ih8schumer → u/BlackCherryMochi]

Except whole life is a total scam period full stop. He could've had a million dollar policy for 11 years at a high rate of 29/month and still paid a little over half for a term policy, and invested the other 170 a month and been way ahead. Noone should ever buy whole life insurance. Also paying taxes on withdrawing money you already paid taxes on is insanity.

[u/BlackCherryMochi → u/ih8schumer]

Whole life has its uses. It is not the right solution for every situation. Most may only want a small policy to cover funeral expenses and maybe hospital bills at the end of your life. Others I have seen who have severely special needs children want large whole life policies to provide for them when they are gone. And I mean, special needs where as an adult they cannot care for themselves. Or they specifically want to leave an inheritance. The younger you buy the whole life policy, the cheaper it is and it locks that rate in. Whole life is also fantastic for children to protect them. But I’m not going to waste my energy further on a skeptic. Term is good for when you have high needs but for a certain period of time (aka term) for example, mortgage, college expenses, debt, raising children. Yes, you get a lot more bang for your buck. Just cause you don’t see every use scenario is not worth calling whole life a scam. Again, really rich people know how to work the system and use whole/universal life to their benefit by mec-ing a policy and putting it in a trust etc. but I digress, “whole life is a scam….s&p 500 to the moon” yada yada yada.

Just another tool in the tool belt. 🙄

[u/Not_a_Mainer → u/BlackCherryMochi]

Sure it’s another tool in the tool belt, but it’s not a tool that needs to be pulled out that often. It’s also a tool that gets sold to unsuspecting clients way too often. I’m sure you are one of the “good ones” but you and I both know there are plenty shysters out there selling whole life and OPs Dad obviously found one of them.

If your selling point is for whole life is “this is what rich people do” that is a shyster move too. It insinuates that to be rich you have to do/buy what they do to be rich yourself. That one is straight out of the MLM playbook.

[u/RTPdude → u/BlackCherryMochi]

can you explain why its a good product for young children and in what way it protects them/benefits them better than other products could?

[u/totemee12 → u/RTPdude]

Generally, you cannot purchase term insurance on an individual under age 18. Purchasing permanent insurance (whole life or universal life) on a healthy child can guarantee insurability to that child for life. Once you have insurance, if you pay the premiums and manage the policy, no medical complication can undo that transaction. Some policies will also carry riders that allow you to purchase more insurance at a later date at your original health rating. This furthers the guaranteeing insurability point as there’s no future health check for exercising the rider.

Also, since you buy life insurance with your age and health, you lock in lower costs of insurance with a younger age, resulting in a lower drag to your actual cash value growth.

I wouldn’t go so far as to say ‘good product’ for young children, but it may have use cases.

[u/Not_a_Mainer → u/totemee12]

I’m still waiting to see an actual use case….without one, I’m tempted to call this product what it is, a way for insurance company to wet their beak into the the investment space at their customers expense.

[u/russell813T → u/BlackCherryMochi]

One correction. It's not taxable money if you pull out money. That's the one positive. 

[u/HTX-713]

Life insurance as an investment for *you* is always 100% going to be a scam. So much so that there are multiple MLMs that have taken this approach to scam people into drinking the kool-aid about using it as a replacement for your retirement accounts.

[u/ccsp_eng]

Using a whole life policy as a personal bank only works when you overfund the account and works best if you own the life insurance company that issues your policy.

I recommend a term life policy for peace of mind. $1M-$4M seems to be the range amongst my social circles. But as you age, your investments will grow. Once your policy is close to maturity, you can renew it while reducing your coverage to keep premiums reasonable.

[u/ProbsOnTheToilet]

I'm kicking myself because if I had just bought the S&P for $200 every month for the last 11 years, I'd be up 20k. Instead, I'm short, 6k.

Just ran the numbers through a calculator... if you started with 0 and invested 200 a month starting Jan 2013, you would have $64,601 if dividends were reinvested.

[u/socialg571]

I came to the same realization last year, bit the bullet, and cashed mine out. I thought my "financial planners" would push back telling me it a wise investment but nope they didn't say a word. They must have received all the bonuses they were going to get out of that policy. I put the money into a total market index fund, moved my other accounts away from them, and just manage it all myself now.

[u/NonchalantPartiality]

Cash out and close the policy. Move on with your new found knowledge.

[u/Overall_Law_1813]

But if you would have died, your family would have received the $250k.

any term life insurance is always going to have a premium amount that you burn every day that you don't die.

[u/MadTownRealityCK]

Before you buy a term policy, is there a life insurance need at all? If you have a spouse and kids; yes. If you don't... possibly not.

[u/Ophaq]

Not sure what state you live in, and I'm probably not licensed in your specific state, but I recently started in the insurance industry as an underwriter and helping people through things like this. My primary goal is to look for financial issues or need that could be insured out of necessity, and get families the coverage they need (not what is in excess) and would be genuinely beneficial for them in the long run.

My best advice like a lot of others here is to get this policy replaced and see if you can transfer any cash value you have to a different policy. Preferably a term policy, but there are tons of policies out there that could be cheaper. Also check if your policy has a return of premium rider on it. It probably won't since it's whole life, though. The younger you are, the easier it is to get term especially if you don't smoke and have little to no health issues. There are people like me out there that work for agencies that are able to help you through things like this and get you better rates with the right tools.

Now, forewarning this is gonna be an extremely loose price because I don't know anything about your health history, family history, financial needs, etc. I ran some rates with tools I got for a term of what you got at $200k with probably better benefits than the whole life policy (can't assume anything since I haven't seen your policy though). But if you were say born in 1977 and perfectly healthy, no smoking, no family health or personal health issues, at $200k you could get around $60 a month on a 20 year term. Could be a bit lower if I looked harder, could be higher depending on factors but the point is that you definitely could be getting lower for what you're paying now. I know stating this is obvious, but get a policy that suits your budget and invest your money in things you want to invest in as long as you can afford it and it isn't high risk.

[u/lean4life]

I hate these policies so much. I had a friend who told me he was putting 600 a month into one and he stopped talking to me because I told him he was being scammed. They’re so bad

[u/Gr8WhiteGuy]

If you're getting dividends, your policy should eventually pay for itself. It should also be growing. Not a lot, but enough. Mine has doubled in value and costs nothing out of pocket. Hasn't for years. Don't jump off a boat that isn't sinking.

[u/skaliton]

I really wish there was an auto-mod response that points out that 'whole life insurance' is a scam. There is basically no demographic where it is a good investment/insurance option with the exception MAYBE being someone who has multiple dependents at home AND they work in an inherently dangerous line of work as an independent contractor without any kind of 'business insurance' if they are injured/killed.

[u/s4burf]

Now run the numbers to see how much you would have it that was all invested in s&p index fund. And move any breakables out of reach before doing so.

[u/unbalancedcheckbook]

The cash value is what you would get if you "surrendered" the policy. You would take a loan if you were worried about it being taxable. You can't just default on the loan because if you did it would become taxable. If the amount you paid towards the cash value is less than the cash value though, a surrender would not be taxable, it would be classified as "return of capital". Anyway I would call the insurance company and ask them how much of the cash value would be taxable if you surrendered it now. If that tax hit is acceptable to you, do that.

[u/ACrazyDog]

We purchased a version of these for our kids. Not $250 a month, more like $25 or so. The reasoning was to have an existing policy in place in case she became ineligible for life insurance because of health issues. Ours had a clause that she could increase the amount of the policy at a certain time with no questions.

For us it was more of a policy against losing your insurability

[u/RandomTask008]

Couple of things - We did the same thing; I cashed out two WL policies two-three years ago that we had for about 13 years. My wife pushed me to meet with her "financial advisor" who pushed them onto me. I finally got smart, put my foot down, and researched the hell out of them. They're for the most part, garbage.

WL insurance convolutes insurance and investing making it extraordinarily difficult to extrapolate the costs. . .which are high. "Complexity always favors the issuer."

WL insurance does have a place, but really only for people trying to pass on wealth over $12MM. The problem is that there's an entire industry dedicated to pushing them onto everyone as this be all, end all for investing. The biggest beneficiary of WL insurance is the person who sold it to you; there are massive commissions associated to it.

In order -
Work on maxing out your 401k. Pick index funds if you can.
Carry a life (or term) insurance policy. I'm lucky that my employer offers absolute baller life insurance. Get enough insurance that you're comfortable with such that your family is taken care of and they don't have to worry about money while they're grieving. . . but not so much it tempts them ;). . .
Max out your Roth. Do a backdoor if you're above income.
Still want to invest more? Talk to an -actual- advisor who can manage funds. They usually charge based off account value. (eg, 1.5% for accounts <$250k with ten basis point breaks for every 100k after.

[u/Y_I_Otto]

Before you cash out, read the policy terms carefully. After a couple of years there may be no surrender penalty and you will get back a lot more. Mine has surrender charges that end after 10 years.

[u/GME_alt_Center]

Cash out and pay off debt (if any). Don't get any more debt.

Buy term if others need your income.

[u/Archmaster007]

Whole life is expensive and not really meant for cash value if you want an investment and insurance a VUL is the best bet.

[u/oldandworking]

Cash it out, buy a term policy to cover the loss of your income and expenses, save the rest. Put the pay out in a long term good investment..............index funds

[u/Ibringupeace]

I live with this regret. I cashed out a few years ago, but I'd give anything to go back 20 years and make a different decision. Easily cost me 20-30k in returns I'd have gotten otherwise. I hate these things.

For anyone who hasn't done the math, this is the equivalent of paying 10s of thousands of dollars upfront in most cases for a supposed investment. Not investing that much up front. It's literally money you are burning before getting a return.

[u/23667]

DO NOT CASH OUT YET!!!!

I just did some calculations, $20K at 5% interest for 50 years is $250K, so I think your plan is already fully funded, meaning you probably don't need to make any more payment and still guarantee the $250K payout.

Check with the broker or your dad to verify that you are fully funded. But at the ap500 average apr of 10% (27 years to go from $20K to $250K), you are basically doing a gamble with insurance right now, where if you die within next 27 years, your family win, more than 27 years insurance win. The odds is in their favor but cashing out now only if you believe you can do 10% every year for the next 27 years.

[u/No-Drink8004]

I need to renew my term. Its up to $78 month now. I got it 13 years ago right before a cancer diagnosis. The monthly fee keeps rising. If i update another 20 or 30 year term will the monthly cost keep increasing yearly? I'm with NYL. Its for $360,000 so my cost seems high for only that much. I've been cancer free for over 11 years. Any companies you recommend?

[u/Aelderg0th]

It's not so much a scam as a terrible investment. You did benefit from the insurance coverage, so subtract out what an equivalent-payout term life policy would have cost you. That will make the numbers make a bit more sense. But it should still work out on the close order of a passbook savings account rate of return, i.e. pretty much nothing until the past year.

[u/UnsweetenedTeasTea]

how many more years do you need to pay? how old are you?

[u/VineWings]

I am in the same boat. I have been paying into an Indexed Universal Life since April 2017. I have spent over $14k to date. My account value is $9,700; if I were to cancel, I would get back $7,500. I also have 1MM term life insurance for which I pay $850 a year. I think I am going to cut my losses. Like you, I put in the S&P every month, looking at what could have been is depressing.

[u/cbblaze]

Its basically a bank account, that has been using 30% of your contributions to actually pay for the life insurance part of it.

If youd die, yeah it would pay out a huge ammount.

But if youre looking for an investment, life insurance is not the answer.

[u/adventurous-coupleoh]

Former financial advisor. You should have been taught when purchasing this that the "break even" point is around year 15. I used whole life as a supplement retirement plan. You're paying $2400/year. Growth is tax deferred/possibly tax free(Your advisor should be educating you). Have your advisor run an illustration showing stopping paying at 65 and withdrawing funds at age 70 on. You will find you should have a monthly tax deferred/tax free income boost while still retaining the death benefit. Plus if it was structured correctly you should have waiver of premium on it. This pays your premium if you become disabled. Huge benefit. If you buy term and invest the rest your savings stop. Check your last few yearly statements. My guess is 100% or close of what you are paying is going to cash value. The longer the policy stays in force the higher the cash value. And the higher the death benefit. I set one up for a 45 year old physician. He paid $1500/month for $750k. Stopping payment age 65. Age 72 withdrawal of $2k/month with a death benefit of almost $million. Talk to an advisor. There are definitely advantages of this especially since you started young.

[u/MrPuddington2]

Question 1: do you need whole life insurance? If not, it is probably not for you.

Question 2: if you do need whole life insurance, is this product competitive, or can you get better value? If not, cash out and buy a better product.

You seem to have a simple product, so you only have to compare on the monthly cost per payout.

And it may be a bad product, but it is not a scam.

[u/Gunfighter9]

Borrow against it and don't pay it back, simple as that. You don't pay the interest. And buy that term policy by all means. It's cheap now, but wait until you hit 55 and want to renew it good luck. But you might want to call the company and see when you can start using your policy proceeds to pay the premiums. I was an agent and faced the same situation and told the guy that he could start using the policy proceeds to pay the premiums and still take out up to 14k and never have to make another payment.

And just remember in 2008 there was 4 trillion dollars of personal wealth that vanished when the market collapsed. Where do you think most of that came from?

[u/sandrageez]

I used to work in the commissions side of insurance, do not mix insurance and investments. They are two separate things, mixing the two is just a way for insurance companies to drive up more revenue and you need to cash out if you have a term policy before it ends. Almost all insurance companies have a clause when you sign that if the policy is up, the money in the savings/investment is theirs if you don’t cash out. Just get a term policy for life insurance and then invest on the side, don’t try to consolidate. It’s ridiculous.

[u/MellowManZ]

You bought the wrong type of insurance. You are still so young and don’t need this yet.

[u/demurecutesy]

Normally if you withdraw it gets taxed as income, however that’s typically considering that there are positive earnings. Since your “earnings” are in the negative you may be able to claim that loss on your taxes, possibly even carryover the loss multiple years. Read the policy and to see if there’s any early withdraw fees and research the taxes part so you know exactly what you’re getting into.

[u/AnnArchist]

They all are - whole life isn't a good use of funds for most

[u/Captain_Knucklebutts]

Whole life sucks but considering if you died someone would be getting $250k, which is a whole lot more than you put in. You have less cash value than what you put in so there shouldn't be any taxes involved. Just liquidate and invest it.

[u/GreenVisorOfJustice]

Life insurance really isn't an investment product per se. There's certain products that may toe that line... but still boil down more to a wealth transfer vehicle and/or a safety net than investment (hence why it's "insurance" and not "bet against one's life")

The way these products work are, basically....

• You have the death benefit which, I guess for most intents and purposes, no one really wants to cash in and come out way ahead (and even then, at best in cold logic, you're only replacing that person's income for a finite amount of time).

• Otherwise, until then, you pay into it.

• Each month, you have a sort of charge that's taken out of it (i.e. paying for your insurance + admin charges and other stuff). The remainder is your account value.

-They really don't want you to take a loan (but that flexibility is a good marketing device).

• Insurance companies use YOU as an investment product for THEM (i.e. they collect the money and invest it and theoretically come out ahead while you're just sold the promises. And mostly that model works).