I am not sure why, but it seems that I have a habit of reviewing my life insurance in the fall. I took a look at my life insurance policies last year around this time, and then way back in 2015 (also around this time of the year). I swear this is simply by coincidence, especially because this year’s inspiration came from a very personal and sad place.
A friend of mine was recently diagnosed with stage 4 pancreatic cancer. He has 3 children 7, 5 and 3. The 7 year old is in the same grade as my son which is how we got to know the family and the 3 year old has become good friends with my daughter. To say it is an awful situation would be an understatement. He is putting up the good fight, and I know he has done some survivorship planning as a responsible husband and father, but I am not privy to what amounts (nor should I be).
This terrible situation made me want to audit my life insurance, both regard to products and amounts. I’ll discuss in further detail below why I used a variety of products.
Life Insurance Polices on My Life
- Convertible Twenty Year Term – This policy has a current death of $850,000. Originally, this was a $1,000,000 policy before this year, however I recently converted $150,000 to a blended whole life insurance policy. The policy is with a mutual insurance company that has been around for a 150 or so years It is a bit more than the next policy, but my goal is to convert this little by little.
- Blended Whole Life Policy – My goal is to eventually convert the entire $1,000,000, so this year I started with $150,000 of the above policy. It is a 50-50 blend wherein there is a base $75,000 policy with $75,000 of term which is slowly being converted through dividends. Currently the policy has a death benefit of $150,052 and cash value of a whopping $12!
- Non-Convertible Twenty Year Term – $1,000,000. Cheapest I could find on the market knowing that it will eventually expire.
- Ten Pay Whole Life Policy – This policy was started way back in 2013; it is pretty amazing to think that in 4.5 years I’ll have this completely paid up. Currently, there is $45,392 of death benefit and $5,709 of cash value.
- Pure Whole Life Policy – Plain vanilla whole life policy with a current death benefit of $108,179 DB and cash value of $6,509.
Not counting any supplemental plans I may have from work I have $2,153,623 of death benefit. Last year I had $2,152,609 of death benefit so a lowly increase of $1,014. I currently have $12,230 of cash surrender value. Last year my cash totaled $9,560.
Life Insurance Policies on The Wife’s Life
- Convertible Twenty Year Term – Death Benefit of $500,000.
- Tiny Whole Life Policy – I bought this policy to help out a buddy who was new to the business. He gets credit for a new policy and I get another whole life in place. It currently has a death benefit of $25,646 DB and cash value of $90.
- Blended Whole Life Policy – Another blended whole life policy with a base of $100,000 and a term rider of $150,000. Eventually the term will drop off as dividends buy more paid up additions. It currently has a death benefit of $250,041 and cash value of $4,845.
- Pure Whole Life Policy – Currently the death benefit is $121,599 and cash value is $1,914.
The Wife currently is insured for $897,286 (last year she $871,957). Currently there is a cash surrender value in my wife’s name of $6,849 (last year we were at $4,429).
Life Insurance on My Children
I am a big proponent of life insurance on children’s lives for two reasons:
- If something were to happen to either of my kids, I am not going to work for a while. Do I have enough death benefit to retire? No of course not, but do I have enough to take off for a bit of time to find out what new normal looks like.
- Each policy has a rider on it that allows the child to increase the death benefit a number of times as they get older without underwriting. If either of them were to become uninsurable for any reason, I have guaranteed them a way to protect their future spouse and my future grandchildren without breaking the bank.
- The Son’s Whole Life Policy (payable to age 100) – Current death benefit of $136,474 with cash value of $2,543.
- The Daughter’s Whole Life Policy (payable to age 65) – Current death benefit of $136,716 with cash value of $80.
Protection doesn’t really matter (hopefully it never does), but cash may be used at a future time and there is currently $2,623 (last year’s total was $2,070).
Total Cash Surrender Value
Last year I wrote that,
I am shocked to learn that I have $16,089 of cash locked up in the policies. I knew that there were a few dollars, but I didn’t think it would be this much. Granted, the internal rates of returns on the policies are probably all still negative, however, this is money that I am positive would not have ended up on my balance sheet anywhere else.
Well, this year I was less shocked to learn that I have $21,702 because of last year’s exercise, but it starting to add up! That amount is not on my net worth statement at all, but I hope to have enough one day to help with retirement. When I complete this exercise in 2019 I have a stretch goal to have implemented a plan to speed up the conversion process on some of those whole life policies.