Should I cash in my whole life insurance?

Jack HungelmannDear Insurance Adviser,
I have some questions about life insurance. Do life insurance agents come to you at your home, or do you go to them? It used to be they came to you. When do you reach a point where you can redeem whole life insurance policies for their cash value? How do you know? What are indications that the life insurance is not worth the investments of the monthly premiums? I've had one policy since 1986. So confused! And I feel pressure from the agent.

-- Perplexed About My Policy

Dear Perplexed,
Insurance agents come in all different shapes, sizes and colors. Some will come to your home. Some prefer to meet with clients in their office. Others do business via the web, telephone and/or email. They usually will meet wherever the client prefers.

As a general rule, you're usually better off not cashing in old whole life insurance policies. The interest rate on the cash value, for one, usually is pretty hard to beat today. Typically, it's 4 percent to 4.5 percent, guaranteed. The guaranteed rates in newer policies are more typically 2.5 percent. Plus, there often are surrender charges applied to the cash value when you cancel your policy.

You used the phrase "not worth the investments." That is one of the myths of cash-value life insurance -- that it is an investment. Buy life insurance only if someone you love will suffer financially by your death. If no one in your life is dependent on you financially, then it might make sense to drop the whole life insurance.

Clearly, you are feeling uncomfortable with what you have now. I recommend you spend a few dollars and talk to a fee-only financial planner or estate-planning attorney to help you evaluate your entire life insurance situation and related issues: coverage amount, beneficiaries, wills, etc.

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