Questions about my variable life insurance policy

[aargh57]

I just got a letter telling me that
"Your insurance policy has a death benefit guarantee provision that is in danger of lapsing."..."It is the death benefit guarantee provision, not your policy, that is in danger of lapsing."

If I want to keep the guarantee portion from lapsing I have to shell out $201 to guarantee my benefit until Nov 15th.

OK, I've had this policy for almost ten years now and I've had serious thoughts about just saying screw it and taking the 5k or so out and putting it into stocks or reducing the principle on my home. When I was sold the policy I was told the main benefit was that I can give myself 0% interest loans in the future. Why the hell do I need to save money to give myself loans?

I guess I do get the benefit of the life insurance but I'm to the point now where I almost think I don't need it. My union would give my wife 10 or 20 thousand and between my IRA and 401k's I have about 100k more. I know that would take a hit but if I croaked she'd still have enough to get by on for at least 2-3 years. Anyway, now with this stuff about losing the guarantee but not the policy I don't know what the hell that means. If anybody could help me out on this I'd really appreciate it.

[squiffy]

I have always read that if you want life insurance, just get warm puppy.

Whoops, sorry. Wrong topic. If you want life insurance, just get term life, which is pure life insurance coverage.

Almost any other kind of life insurance vehicle is just a rip off, because the insurer gets to use your money to invest, promises you some crappy rate like 4-5%, and keeps the difference.

You could put the money into an index fund and earn 10% over the long run, so why give the insurance company your money and let them make 10% and give you 5%.

It's called, they deserve to have all my money, because they are smarter than me.

Anyway, if you have lived 20 years without dying, then chances are, you will not die, as the past is a good predictor of what will happen in the future.

Am heading out to work now, but I will look around for some insurance websites and post them. But check fool.com and some other general personal finance sites. Maybe money.com and yahoo financial.

Also consumer reports usually discusses various forms of life insurance. Even suzy ormann discusses it.

[Sniper]

[ QUOTE ]
Anyway, if you have lived 20 years without dying, then chances are, you will not die

[/ QUOTE ]

hmmm... you've discovered the secret to immortality?

[aargh57]

[ QUOTE ]
[ QUOTE ]
Anyway, if you have lived 20 years without dying, then chances are, you will not die

[/ QUOTE ]

hmmm... you've discovered the secret to immortality?

[/ QUOTE ]

Damn, I've already lived 32 without biting it. WooHoo!!!

Anyway, thanks for the advice. The only other good thing that they hang in front of me is that it's tax deferred but I think I'm gonna shop around and drop this one.

[Elaboration]

[ QUOTE ]
"Your insurance policy has a death benefit guarantee provision that is in danger of lapsing."..."It is the death benefit guarantee provision, not your policy, that is in danger of lapsing."


[/ QUOTE ]

Universal life, by definition does not have a guaranteed dealth benefit. Meaning, if you dont pay enough premium or earn a high enough rate of return the cost of the policy 'could' sap up all of the cash value and your insurance will expire.
Some companies add a guranteed component to these policies stating that if you pay some 'x' minimum amount of premium your death benefit will be guranteed even if you have 0 cash value in your policy. It is a safe guard basically.

It sounds like you have stopped paying premiums on the policy. Before you ditch the policy in lieu of a new policy call the insurance comapny (I assume the broker is long gone) and get put in touch with policy services. Ask for an "In-Force Ledger". This will show you what your policy looks like now and in the future.
I'm not going to tell you what is right for you and anyone who is with such little info is just blathering, but not taking this step would be hasty.

[ QUOTE ]
I guess I do get the benefit of the life insurance but I'm to the point now where I almost think I don't need it. My union would give my wife 10 or 20 thousand and between my IRA and 401k's I have about 100k more. I know that would take a hit but if I croaked she'd still have enough to get by on for at least 2-3 years.

[/ QUOTE ]

I will say this. I'm going to guess you are late thirties or so? If you die and your wife uses 20k and your retirement accounts to squeak by for a couple and then gets to start over at that age...well its easy to say life sucks, but I think some level of insurance is probably appropriate.

Hope that helps-

[Peter666]

Universal Life Insurance works very well IF you plan to pay in excess of the insurance premium. It works out that this excess reduces the premium and increases the cash value of the policy at a rate that in the future (10-20 years) you have more in the Cash Value than you put into it, plus the bonus of Life Insurance that will last until your natural death at any age. That makes it a superior product for those willing to pay more than the minimum premium per month.

However, it sounds like to me you want to pay as little per month as possible now, in which case Term life insurance would be much better for you (assuming you are below 50).

There is no such thing as one type of life insurance (Term, Whole, UL) being superior to another. It all depends on the individual's circumstances and then applying the appropriate product. In general, you get what you pay for. Putting more cash into something generally means a higher EXPONENTIAL return. The rich have a much easier time getting much richer than an average Joe becoming rich.

[Peter666]

One other point I forgot to mention: A young person buying Universal Life insurance on someone older than them can have a much higer TAX FREE return upon the older person's death than if they were to invest the money in any other way.

[aargh57]

Elaboration and Peter,

Thanks for the advice,

A little more information. I bought this policy through American Express Financial and still have it through them. As of Jan 31, 2005 I had about $5500 in the policy. In my early 20's I was putting $2000 per year into it but after I got married I had to stop (I'm 32 now). I'm willing to put more money into the thing but I didn't know if this is the best place to put my money for the future. I currently max out my 401k and IRA so I don't know if this should be the next thing or not.