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knowitall | What is meant by cash surrender value in my whole life policy? |
CAN i USE MY INSURANCE AS A RETIREMENT VEHICLE? |
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Doing the Right Thing
 |
Cash surrender value = Current Cash value - surrender charges.
You can use your life insurance as a form for saving for retirement as long as you don't die, but you are losing lots of money by doing so. If you want to keep the life policy, you can borrow the cash value and loan interest will be charged. Your death benefit will be reduced by any policy loans. OR you can cancel it and pay surrender charges.
But if you die someday, all the cash value in your life policy will be kept by the insurance company. Who sucky is that?
If you want to build wealth for retirement, you are better off investing into a mutual fund and/or government bond funds. Mutual funds has a historic rate of return of 12% in the past 20 years. How's it going to do in next 20 years is anyone guess. But the long term trend is that stock market goes up.
If you want to have your investments grow tax-deferred, you should open an IRA. |
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Insurance
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1. Cash Surrender Value = Cash you can take back when you cancel your insurance policy. Usually this amount will be very low compared to the amount that you have paid.
2. During retirement you need cash. if you surrender your policy in exchage of cash than you don't have any protection.
For retirement, you should have a retirement income plan |
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mbrcatz
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Sure you can, but it's the WORST rate of return! About 10% of what you pay into it, goes to "cash value". There are surrender fees.
If I told you, oh, here's a retirement fund, for every $100 you pay in, $10 will be available to you, would that be a good return on your money? Because that's the return on "whole life". Plus, when you "surrender" the policy or take the cash, it cancels out the policy, then you have no life insurance! |
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Jason
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The surrender value is the amount of money you would get if you surrender (cancel) your policy. You can use life as a retirement vehicle. I would recommend looking at variable universal life. Whole life isn't as flexible as universal life with regards to your options with the policy. The advantages to using life insurance is you don't pay any taxes on withdrawls or loans if you keep the policy in force until the time of death. Find a good local agent who is securities licensed and make an appointment. If your in Nevada email insurance.agency@yahoo.com. |
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seaportma
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All of this "advice" tainted by personal bias.
Let's focus on the original question.
The life insurance policy's cash value is how much "cash" the life insurance has accumulated.
If you terminate the policy, the "cash surrender value" is how much you get. The "cash surrender value" might be lower than the "cash value" if you terminate the policy, especially in the early years. (This is where the term "surrender charges" came into play.) But if you hold the policy long enough, the surrender charges disappear after a number of years. (The table is in your policy contract.)
Can you use the whole life policy as a retirement vehicle? Yes. If you do, generally the suggestion is to take a loan against your policy.
Remember, the cash value is composed to two parts: principal (premium payments) and accumulated interest that has grown tax deferred.
If you terminate the policy, you will get a check -- and any money in excess of your premium payments are taxable.
If you take a loan, this money is not taxable. What will happen is that you borrow money from the insurance company. The life insurance company will do this because they expect that when you die, the death benefit will first be used to repay the loan. If there is any money left after that, then the beneficiary get the remainder.
There are some positives to using whole life policies as a part of your overall retirement planning. While the systematic premium payments may seem rigid, it is no more rigid than committing to saving (say) $200 per month. And while the rate of return may not have the same upside potential as investing in mutual funds, it does not have the same downside risk.
Here is the bottom line: if you make the promised series of premium payments, the insurance company will give you a table that shows you what your guaranteed policy values are in a particuar year. |
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