What is the cah value of life insurance if started at age 25 for $50,000 at 5.5% interest for 40 years?

Hi, your friendly life insurance guy here again!

That's a great question. I'll post two things here today. One is a response to your question. The other is a response to some of the earlier posters.

When trying to find the cash value of such a policy, there is no set way to do it for a hypothetical case "off the cuff." Many factors are part of the calculation. They include:

Is the policy from a stock company or mutual company?
Were dividends paid every year the policy was owned?
Were the dividends used to buy paid up insurance or were they disbursed?
What were the premiums for the policy?
Did the owner overfund the policy?

There are other questions, but that should be enough to show why an off the cuff answer is not really possible. To find the value of an existing policy, however, is simple:

Call the insurance company and request an "in force illustration." This will show all the current, historical, and projected future values for the policy.

To address the original posters:
One person mentioned Suze Orman. To that person I must point out that you are defending the financial advice of a woman who goes on television and radio, listens to generalized information from a caller for a short time, usually 30 seconds or less, and then dispenses financial advice, usually a canned strategy she shoe-horns most people into.

I'm in the industry and I could lost my licenses for doing that because there is just no way to know enough about a person's situation to dispense guidance you can be sure is appropriate.

Now, a great deal of what she says is very helpful. It's just totally inappropriate to advise people on such a surface level investigation of their financial situation.

Suze Orman's mantra is "buy term, invest the rest."

Suze Orman, unfortunately for her clients and listeners and readers, rarely discusses what happens to her clients that die 1 day after the term policy expires.

It's really tiresome to hear people talk about whole life insurance as if it's some evil product designed to hurt the client. It's not. Term insurance, on the other hand, pretty much is an all-out win for the insurance company and generally a total loss for the insured. They are designed statistically to pay out very rarely. Depending on the company, the odds against payout can run as high as 99%. They fail to pay out because the policies lapse because people get tired of paying a bill for a policy they know is likely to expire unused, meaning their premium went down the drain. They also fail to pay because people tend to outlive them.

Universal Life and Whole Life policies, on the other hand, are items the insurance company has to pay out so long as you pay the premium and don't let it lapse. Those are the ones the insurer is absolutely going to take the financial hit from.

So yes, term insurance is cheap. Yes, it gets you more coverage per premium dollar than other types. Yes, it's great for covering a mortgage or getting 25 years of protection so you know you will keep the house and put the kids through school.

That does not, by any stretch, mean that term insurance is the only useful kind of insurance or that no other type should be considered.

The user who posted that insurance cannot be used as a savings vehicle is incorrect. It can. What it cannot be used as is an investment vehicle because it is not a security. If you buy whole life from a mutual company it is a dividend participating savings vehicle as well as an insurance policy.

Over time a person will tend to accumulate much, much more wealth by using an investment, rather than a savings vehicle like an insurance policy. That's the probable outcome and no one here is likely to argue against that. I don't recommend using Whole Life as a person's sole wealth accumulator. That is not its function. But telling people Whole Life has no valid use is simply incorrect. I'd be happy to list several particularly useful ways to benefit a client with it if anyone cares to ask.

But yes, it bears repeating: Wealth accumulation is generally best accomplished with investment vehicles, not insurance policies. It also bears repeating the Suze Orman should probably not be dispensing financial advice on the basis of 30 second radio or television call-in conversations (nor should any advisor) as she cannot possibly know enough aboutg a person's situation to properly advise on anything but the most superficial level.