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amason1226 | Paid term life insurance policy conversion to whole life? |
If a paid term life ins policy (virtually no cash in value) is expiring and is converted to a whole life policy..is the rolled over policy value available for cash in immediately? Or is there some type of rebuild/regathering of interest time span before it has the same face value as before?
Additional Details
The policy was actually purchased when I was an infant, so I had no choice in the matter. I just know that if I were to of cashed it in I wouldn't receive anything remotely close to the face value, and it wasn't worth doing it considering what family members paid into it. I was considering keeping it for burial/death expenses however I agree that it is quite possibly not worth it if I am able to just cash in and not sink anymore money into it..my money at that. |
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Doing the Right Thing
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I'm guessing you think you can cash in the face amount of the policy. Sorry that is totally impossible unless you die. But still, you won't cash in the face amount, your beneficiary will.
When a term policy is converted into whole life, you keep the same death benefit, but premiums will increase dramtically to include cash value growth. Your cash value will never equal the face amount until you are well in your late 90's or age 100.
Term policies do not build cash value, that why they are so inexpensive to purchase. So it gives you more flexibility on what you want to do with your savings. When you cancel term policy, you get nothing. The purpose of life insurance is to benefit anyone who is dependant on your income. Is anyone currently dependant on your income right now? If not, then you should purchase a small 30 year term policy of around $20,000 coverage. Unless you have at least $10,000 saved up somewhere where family members can access it in case you die, you need life insurance.
As you get older and your life changes (such as getting married, buying a home, and having kids), you would need to significantly increase your coverage. As your kids gets older and as you finish paying your mortgage, your need for life insurance declines. In fact, you might not need life insurance at that point.
I always sold term insurance to middle income families and help them invest the money. That way they can afford the right amount of protection and as the years goes on, their investments will grow to a point where they become "self-insured." When it comes to life insurance, no one really wants it, but they see a need for it because they don't have much money saved right now and have lots of financial obligations. |
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Good♥Gyrl
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Most of these answers are good, but I do want to correct Sad Soul - typically a permanent policy will pay a death benefit equal to the face value plus any cash value, less policy loans.
Secondly, I agree with the guy who posted above- life insurance is not an equity investment like mutual funds, so to compare the two is like comparing apples and bananas, and anyone who does so is not well educated in financial matters.
To answer your question, there is a possibility that the company you're with now will allow you to convert the policy (provided that you're still within the conversion period, because you DID say you got the policy when you were an infant - usually conversion periods go up to 20 years max from my experience) AND give you conversion credits. This means CV up front (the credits), but it might not be available for LOANS right up front. Good luck |
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Financial JUSTICE
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don't buy whole life, they are expensive and only pays out one benefit. stick with term insurance. saves you money so that you can really invest the difference! |
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ricks
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life insurance should not be thought of as an investment. It serves a completely different function than investments. So, please dont confuse the 2. It is bad advice to outright say life insurance is a bad investment & worthless to have.
But as to your question. I am a bit confused as to what it is you think you have. Term insurance does not carry any cash value what so ever & does expire after the term. So if you kept it for 30 days or 30 years, you would & should accumulate nothing. I think you would need to check to see what you have. Because what you are saying you have (term), does not add up to what you think you have (cash value). It should also be noted that term can not be paid up as whole can, which is another reason I suspect you have something different from what you think.
Only whole life (and its cousin Universal & VUL) will accumulate any type of cash value that you can take out. Even with those, it will not be & is not meant to be the same as the face value of the policy. Also, whole life never does expire. It will cancel for non payment, but wont expire after a time frame.
I would be interested to know why someone would purchase term insurance for an infant in anything other than a term rider, which does expire after the child turns a certain age (18-25 depending on the company). Sometimes they are convertable to whole life before the birthdate of the child of the last year of enforcement. A regular term may or may not be convertable during a certain time, IF that option was available to them at the time of purchase & they did purchase.
And as far as the convertability credit is concerned, you will not realize immediate cash value. |
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Travis
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When you convert to a whole life policy it starts collecting the cash value at that time. There is not any cash immediately because with term you are paying for "pure" insurance. |
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jameshdwyer
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Well for starters a term insurance policy has not vitually no cash value it has none at all. Basiclly a term insurance policy is a bet. You are betting you will die and the company is betting you will not. A convertable policy, one that starts as a term and converts into a whole life polic, typically has a cash building period. Unless the policy states there is a cash value when converted then there would be none. Personally, as an insurance agent, I reccomend people to buy term insurance over whole life as you get more bang for the buck. It also depends on what age you are and what needs you have. I always tell people to buy less the older you are as you would have less expenses to cover. |
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celticwarrior7758
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I don't know the exact answer to your question, but I am wondering why you are sinking money in any kind of life insurance. It is a terrible investment of money. Mutual funds give you a much greater return. If you want a life ins. policy to cover your death, burial, etc... that is one thing, but if your money goes into mutual funds, over 20 years it builds up a much larger amount of money. Any good investment broker will tell you this. Life Insurance is a scam.
If it was me I would just take the money and put it in a mutual fund and let it make money for you and your retirement. I am sure insurance salemen/brokers don't like what I say, but facts speak for themselves. Compare how much a burial would cost and how much the money would make in the long term if invested properly somewhere else. I don't know how much cash you are talking about, but lets say it was only 10 or 15 thou. In 20 years at a conservative 8 % would be a lot more money than a life insurance policy. As I said earlier, term life and all of these other insurance policies are a scam. The only people pushing them are the people that make money off of selling the garbage.
A good thing to do is look at the successful investors and where they make their money in investing. |
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michael76049
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first off, please ignore celtic warrior's comment. he is obviously bitter and doesnt understand the question.
unless you have health issues, i would consider applying for a new policy unrelated to the term you have now. if you opt to get a whole or a term policy, you are quite likely to get just as good a deal all by yourself - probably even better.
even if you "rolled" some term with cash value (i agree, i have never heard of this) into a whole life, it wouldnt make any real difference. since it is confusing, go with something you know. |
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jason9156
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Your policy could implode. At that point, the cost to insure you is greater than the premiums that you are paying, and the insurance company will dip into your cash value to keep you insured. At some point you will not have any cash in your policy. At that point, the insurance company will write you a letter and ask you if you still want to be insured for the amount of insurance that your premiums will now cover, or do you want to send them more money to keep you covered at the same amount, or would you rather just cancel the policy. I would just stay with the term until you don't need insurance anymore. |
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529s.com
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There are two companies that provide good whole life policies - Northwestern Mutual and Mass Mutual. If you want to have some whole life, go with one of them. |
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mbrcatz
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Well, term life has NO cash value. No, just because you roll it, that doesn't mean it has cash value. You'll build about 10% per year of your premiums into cash value, but you probably have to wait 3-5 years in order to be able to take it.
FACE value, aka, payout if you kick off, doesn't change. |
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