I have a policy for 200k. I took a loan out on the policy for 30k. After the loan I have a cash surrender value of $ 36,165.00 Can I give the insurance company the 30k from the 36k as a payback for the loan to get out of anymore interest payments. Not sure if I am making sense.
I am a recovering alcoholic with 9 years. Problem is I am in therapy for anxiety/depression after financial collapse in 2008-9.
I would dump that policy and get Term Life Insurance instead
Term life is much cheaper and a better all around deal
If you cancel the policy, you’ll get the cash value, minus loan amount plus interest and surrender fee.
That means, you have to cancel your policy, to get out of any more interest payments.
This is a clear example of why cash value policies are a ripoff – you’re paying, what, 8% interest? to the insurance company, to borrow back your OWN money. Sheesh. Cancel the policy and walk away. No use throwing good money after bad.
1) First two responders don’t know what they’re talking about. Clearly you can’t recommend someone to cancel a policy without knowing whether they’d get another policy.
2) The interest you pay on the loan goes back into your own cash value. You’d think someone that has answered that many insurance questions would understand that.
3) You COULD surrender the cash value to pay off the loan; however, keep in mind that as you age your universal life policy could get progressively more expensive and end up lapsing.
4) Contact your financial advisor and have them help you plot a course that makes sense.
5) Also, for folks that don’t like cash value policies (me being not a very large proponent), the drawback is the large UP FRONT costs. You’re beyond those costs, so that’s a moot point.
You don’t have to pay back the loan. You can cancel the policy and get the remaining surrender cash value. With the loan amount, it will be recognized as income and you will pay income taxes on the $ 30k. Before canceling, you should figure out if you still need life insurance. If you do, I suggest looking into getting term life insurance. After the term policy is issued to you, then you cancel the universal life insurance. With any cash value you get, you can invest it in mutual funds or put it into an annuity.