Need help with Life Insurance/Investment question

[Jaycie685]

As some of you know I have life insurance with Pacific Life. Well I need some help and thought maybe someone here might be able to help me out.Back in November 2003 I sat down with one of the Pacific Life reps (I had no intentions whatsoever of getting life insurance but my mom talked me into it and since I didn't have a clue about it back then, I went with it) and I ended up getting this policy that's part life insurance/part investments. From November 2003 to December 2005 I have been paying $150 a month which brings my current total contribution to $3,750 (that's $150 X 15 months).Well yesterday I ended up talking to my roommate about it and he said that since I'm in the military I didn't need life insurance since I'm covered by the military. I don't have kids and I'm not married so I shouldn't even be worrying about that stuff at this point in time. He suggested that I cancel my policy and get some money back. I also have a Roth IRA set up through my bank.So after that discussion I called Pacific Life to see how I go about surrendering my policy. The lady on the phone said that in the two years I've had the policy, I currently have $2,000 cash value and if I surrendered it, there will be a surrender charge of $1,000 which means I'll only be getting $1,000.00 back out of the $3,750 I've already put in. And the lady said something about me not withdrawing anything for 10 years? I was lost at that point so I don't even know what that 10 years applies to.So then I told my roommate what the lady told me and he then said that since the cash value was that high I should keep my policy. So now I'm really confused as to what to do!All I know about life insurance is that it's money set aside so that when I die my husband or kids are taken care of and the money will be used to pay off any debt I leave behind. Now my question is... should I keep this policy with the way it's performing even if I don't need life insurance (keep in mind part of it is investment) at this point in my life or just go ahead and surrender it, take the hit and save my money? Is this something worth holding on to?I really need some help with this since it is definitely going to affect my future!

[mcgusto82]

well, this is difficult to decide and yet easy.150$ for a monthly premium.. that's really high. my veteran's group life insurance is less than 20$ a month.you will have paid 18k$ at the end of those 10 years. your cash value will be a little lower than that. i think the 10 year thing is the time you would need to wait to avoid any fees for surrending or cashing out on your policy.life insurance is good weaqther you're married or not. somebody has to pay for your funeral... so agin, you can either pay out 18k$ for 10 years or loose out 1600$ to get back 1k. i won't tell you what to do, but that much to pay a month could very well be going somewhere else. look thru your contract to find when you can surrender your policy without penalty.

[mcgusto82]

plus one more thing. you didn't specify if it was whole life or term life insurance. if it's whole, then the rate might not be soo bad. if it's term, then try to find a better whole life insurance.term life is basically life insurance for a specified time. 20 years.. ???whole life is entire life insurance. usually the fine print read 100 years max. the rates on whole life are fixed when you get it.term life is fxed but when it expires, you are subject to the new inflated rates.

[djb383]

May I suggest you go to http://www.daveramsey.com/ for some guidance and dump the rip-off whole life insurance as soon as you can (read the fine print of your policy or have a lawyer look at it). You don't state your age, but as an example a female age 25 in good health should be able to purchase a $500,000 20 year level term life policy for about $25/mo. You'll have a half million dollars of coverage in the event of your death for 20 years. If you put $125/mo. into a good growth mutual fund which averages 12% you will have in excess of $123,000 cash at the end of 20 years. Two years and one month ago, if you had bought a term life policy for $25/mo. and invested $125/mo. in a good growth mutual fund, you would have today $3500 in cash and $500,000 in life insurance instead of $1000 cash value and ? in life insurance. Again, insurance is a very lousy investment tool and check out the site above for some good financial advise. Best of luck to you.

[jimincalif]

You don't say how old you are and how much the policy's death benefit is so it is difficult to be specific. I'm not in the insurance biz now, but actually started at what was then Pacific Mutual (now Pacific Life) out of college, so I know a bit of the game. Some general observations:1 - Anyone who has children and is a family breadwinner has a duty to their kids to have adequate life insurance. 2 - Anyone with no dependents probably doesn't need life insurance (except those with large illiquid estates worth over $2 million might need it for liquidity to pay estate taxes)3 - Broadly speaking there are two types of life insurance, whole or universal life (which include a savings component) and term insurance, which has no savings at all, you pay for a death benefit for a year, if you don't die, the insurance company keeps the money. For young relatively healthy people term insurance is much cheaper. And you can buy term with a fixed 10, 15 or 20 year premium.4 - Got to a site like http://www.quickquote.com/ plug in your age and the face amount (death benefit) of your policy and see how much a term policy costs for the same death benefit. Compare that to the $1800 per year you are spending now.5 - Keep in mind that sales commissions on whole life insurance can be as much as 100% of the premiums in the first couple of years of the policy. This is why there is a "surrender charge" if you cash out early, the insurance company is recouping its costs to pay its agent.6 - First question to ask yourself is, do I need life insurance? Is anyone dependent on your income? Do you have some large debt that would be a burden to someone if you die? If the answer is no, you probably don't need life insurance. You have some thru the military and most jobs with health insurance include a death benefit of anywhere from $5K to $15K that'll pay for your funeral. Let the lender repo the car, you're dead, who cares?7 - second question, if you do need insurance, how much? Lots of rules of thumb out there, 5x your annual income, etc. But these are very general. Need to figure what is needed for dependents to live, etc.8 - Third question, are you better off with term insurance or whole life? Most people are better off with term. Insurance as a savings vehicle is usually a bad deal. And there are lots of other options to save without income taxes (Roth, IRA, 401(k), etc.)9 - Educate yourself about these sorts of things, life insurance, investments, taxes, saving for retirement, etc. Read the business section of a good newspaper regularly, there are usually personal financial advice columnists. Also online. A good one is Humberto Cruz, here is a link:http://www.sun-sentinel.com/bu...mnist Read about this stuff regularly and you won't get buffaloed by an insurance salesman. You will also know when you need insurance. And as I said before, if you need it for dependents, you should have it, and a lot of it.Bottom line, if you're young, healthy, no dependents, you probably don't need any life insurance beyond what you get with your job.Sorry for the long message, but this sort of stuff is a personal agenda with me, getting folks to learn about and make good informed financial decisions.Good luck.

[Jaycie685]

First of all, thank you to everyone who has helped me with this! I really appreciate all this and the input really matters to me!Secondly, to answer your questions:Quote, originally posted by mcgusto82 »you didn't specify if it was whole life or term life insurance.After looking through my portfolio... It says Basic Policy - Flexible Variable Life Insurance. I'm guessing it's term?Quote, originally posted by djb383 »You don't state your age, but as an example a female age 25 in good health should be able to purchase a $500,000 20 year level term life policy for about $25/mo. You'll have a half million dollars of coverage in the event of your death for 20 years. If you put $125/mo. into a good growth mutual fund which averages 12% you will have in excess of $123,000 cash at the end of 20 years. Two years and one month ago, if you had bought a term life policy for $25/mo. and invested $125/mo. in a good growth mutual fund, you would have today $3500 in cash and $500,000 in life insurance instead of $1000 cash value and ? in life insurance. Again, insurance is a very lousy investment tool and check out the site above for some good financial advise. Best of luck to you. I am a 26 y/o female, non smokerI also found this in my portfolio:Manager........................Premium %........Investment OptionsAIM..............................16%...................Blue Chip............................................................Aggressive Growth............................................................Diversified ResearchCAPITAL GUARDIAN.................................Small-Cap EquityGOLDMAN SACHS....................................I-Net Tollkeeper............................................................Short Duration Bond............................................................Financial Services............................................................Health SciencesINVESCO................................................TechnologyJANUS.............................6%..................Growth LT............................................................Focused 30......................................5%..................Mid-Cap ValueLAZARD..........................14%.................International ValueMFS.................................5%.................Capital Opportunities......................................14%................International Large-CapMERCURY...............................................Equity Index........................................3%................Small-Cap Index........................................3%................Emerging MarketsOPPENHEIMER.........................................Multi-Strategy............................................................ Main Street CorePIMCO...................................................Inflation Managed........................................2%................Managed BondPIMCO Advisors-NFJ............6%................Small-Cap Value ............................................................Money MarketPACIFIC LIFE..........................................High Yield Bond.............................................................Fixed Account.............................................................Fixed LT Account.............................................................Equity IncomePUTNAM..................................................Equity.........................................3%................Aggressive EquitySALOMON..........................14%................Large-Cap Value.........................................4%................ComstockVAN KAMPEN............................................Mid-Cap Growth.........................................5%................Real EstateSorry about all the dots, it was the only way I could get it in here without being all bunched up.I have no clue as to what all those are! I just included them so someone could explain to me what those different percentages are.Quote, originally posted by jimincalif »You don't say how old you are and how much the policy's death benefit is so it is difficult to be specific. I'm not in the insurance biz now, but actually started at what was then Pacific Mutual (now Pacific Life) out of college, so I know a bit of the game.Since you are somewhat familiar with Pacific Life, I have Flexible Premium Variable Life Insurance It also says Initial Face Amount: $150,000.00Total Initial Coverage is also $150,000.00Pretty much I want to know whether I should hold onto this policy or surrender it. I am currently covered by the military as far as life insurance goes. My fiance is currently active duty as well and when I get out we will be getting married so I should still be covered by the military right? I don't know what to do about the investments part of it. I currently have a Roth IRA and part of my paycheck goes into the TSP (Thrift Savings Plan... pretty much the military's equivalent of the 401k).

[jimincalif]

You don't have a term policy, you have a whole life/universal life policy. Some of the money you pay goes to the insurance company for covering their risk to pay your death benefit, and their policy expenses. Some of the money goes to savings, hence your portfolio of funds. A quick look on the internet shows $150K of term insurance available for somewhere between $100 - $250 per year depending on the company, term of contract etc.Sounds like you've determined you don't need the insurance. Question is, is it better to keep it or surrender it. How long until the surrender charge goes away? If you keep the policy one more year and the surrender charge goes down by $500, and your cash value increases by $1000 or so, you break even. If less, then it is costing you more. You should be able to as PL or the agent for a projection of cash value and surrender charges over the next couple of years. Compare that with what you will pay to see if it makes sense to keep or surrender it.