Life insurance policies - should my dad continue with his?
Hi
My father is 75 next month. He has a whole life insurance policy for $120,000 with Farmer’s. It is not a fixed contribution policy, and Farmers puts up the premiums every year. They started at about $150 per month, and are now after about 26 years at $350, and going up all the time. The surrender value of the policy is $282. Is it worth continuing with this policy, or should one just regard it as a term policy that has ended, and surrender it. He would just add the monthly payments of $350 per month to his $401K payments into the Prudential, that has been doing very well. (No, he does not have to draw on the 401K because he is still working and is a State employee (Professor)). His concern is for his wife. They have a paid-off house worth about $350,000, and some $500,000 in investments and will have a pension of $40,000 per annum, and currently receive social security payments to them of $40,000 per annum. He still works and makes $100,000 per annum. My father also has a fixed payment whole life policy with Jackson for $200,000, which he intends keeping up. Should he continue with the Farmer’s policy?
Thanks
My father is 75 next month. He has a whole life insurance policy for $120,000 with Farmer’s. It is not a fixed contribution policy, and Farmers puts up the premiums every year. They started at about $150 per month, and are now after about 26 years at $350, and going up all the time. The surrender value of the policy is $282. Is it worth continuing with this policy, or should one just regard it as a term policy that has ended, and surrender it. He would just add the monthly payments of $350 per month to his $401K payments into the Prudential, that has been doing very well. (No, he does not have to draw on the 401K because he is still working and is a State employee (Professor)). His concern is for his wife. They have a paid-off house worth about $350,000, and some $500,000 in investments and will have a pension of $40,000 per annum, and currently receive social security payments to them of $40,000 per annum. He still works and makes $100,000 per annum. My father also has a fixed payment whole life policy with Jackson for $200,000, which he intends keeping up. Should he continue with the Farmer’s policy?
Thanks
David Johnson, CD
Insurance works on actuarial tables. More people die as their age increases. I would drop the Farmers Policy.. He should have invested in 20 year pay life policy of $500K @ $150/month when he was in his 20's it would now be paid for. I am not a financial advisor so I would suggest that they consult one
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A whole life policy with surrender value of $282 and premiums of $350 * 12 = $4,200 per year is not worth keeping up. Drop the policy and invest the $4,200, or if he still feels he needs the coverage, look at term life. But even term will be expensive as he ages, and shopping around would be mandatory.
Side note: Some states issue life insurance, though this is not widely known, e.g. Wisconsin. This might be a possibility if he needs a small amount of supplemental insurance.
https://oci.wi.gov/Pages/Funds/SLIFOverview.aspx
Side note: Some states issue life insurance, though this is not widely known, e.g. Wisconsin. This might be a possibility if he needs a small amount of supplemental insurance.
https://oci.wi.gov/Pages/Funds/SLIFOverview.aspx
You really should connect with a certified financial planner. Its not possible here to analyze your Dad's financial situation. Assuming this policy has the low surrender value you provided, its got to be pretty new. Also considering the fact the premiums are rising each year, its likely not a straight whole life policy (those premiums never change, except for down once the the policy reaches a certain age.)
A planner will be able to do two things for you that are essential. First tell you exactly what the product is. And second recommend the best products available to meet the goals you laid out. There hundreds of instruments available for a person his (my) age to accomplish just about anything. I use investments in a variable market based annuity to accomplish pretty much the same results you are looking for at zero cost for the included death benefit (its built into the annuity). But that may not be the best solution for him.
This article should help...
https://www.fool.com/investing/general/2015/06/05/how-to-find-a-certified-financial-planner.aspx
A planner will be able to do two things for you that are essential. First tell you exactly what the product is. And second recommend the best products available to meet the goals you laid out. There hundreds of instruments available for a person his (my) age to accomplish just about anything. I use investments in a variable market based annuity to accomplish pretty much the same results you are looking for at zero cost for the included death benefit (its built into the annuity). But that may not be the best solution for him.
This article should help...
https://www.fool.com/investing/general/2015/06/05/how-to-find-a-certified-financial-planner.aspx
Here is another resource courtesy AARP you may find useful before hiring a financial planner...
https://campaigns.aarp.org/interviewanadvisor/?CMP=EMC-MIM-DIS-OTH-RETIREMENT-SAPLA-Savings_And_Planning_Interview_An_Advisor-CTRL-640402-1103002-04242019_Hero_IMG-3719339-&mi_u=9133968&mi_ecmp=20190424_SP_InterviewAnAdivsor_CTRL_SL2_640402_1103002&encparam=+ZL+3IZZXuNDJ77xENIwLg==
https://campaigns.aarp.org/interviewanadvisor/?CMP=EMC-MIM-DIS-OTH-RETIREMENT-SAPLA-Savings_And_Planning_Interview_An_Advisor-CTRL-640402-1103002-04242019_Hero_IMG-3719339-&mi_u=9133968&mi_ecmp=20190424_SP_InterviewAnAdivsor_CTRL_SL2_640402_1103002&encparam=+ZL+3IZZXuNDJ77xENIwLg==
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Thanks
You are very welcome. Happy to help