Life Insurance with Savings - withdraw due to unemployment

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Hello.  Was wondering what options I have.  Am almost 48 yo with a wife and 2 teenage kids(one will be in college next Sept) and have a term life insurance with one of the major insurance companies that has a coverage of $516K and monthly rate of $180.  The cash balance is around $45K. Right now, I don't pay the monthly premium of $180 and just let the the interest cover that.  My unemployment just ran out in NJ and I'd like to start taking some or take the money out completely to cover my monthly mortgage payments until I find a job.  I'd still like to get a cheaper insurance if possible after I take the money out so if anybody can offer any good life insurance companies out there.  I really don't want to take anything from my 401K accounts yet. My wife is working but has financial commitments of her own.  I'm a non smoker and in good health.  What are my options?

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$500k of 20 year term will run you $60-80/month or so. Check quotes at term4sale.com

You could cash out the existing plan and get similar coverage for ~1/3 the cost you're paying now.

jerosen said:   $500k of 20 year term will run you $60-80/month or so. Check quotes at term4sale.com

You could cash out the existing plan and get similar coverage for ~1/3 the cost you're paying now.

  Also, with teenage kids and a working spouse, OP may need just ~5-10 years of coverage.

fwuser12 said:   
jerosen said:   $500k of 20 year term will run you $60-80/month or so. Check quotes at term4sale.com

You could cash out the existing plan and get similar coverage for ~1/3 the cost you're paying now.

  Also, with teenage kids and a working spouse, OP may need just ~5-10 years of coverage.

  Depends on whether OP's spouse can pay for the mortgage once the kids are out of college, AND if OP's spouse would downsize.

Tax implications? With no income of your own, it may be a good time (?)

legende said:   Hello.  Was wondering what options I have.  Am almost 48 yo with a wife and 2 teenage kids(one will be in college next Sept) and have a term life insurance with one of the major insurance companies that has a coverage of $516K and monthly rate of $180.  The cash balance is around $45K. Right now, I don't pay the monthly premium of $180 and just let the the interest cover that.  My unemployment just ran out in NJ and I'd like to start taking some or take the money out completely to cover my monthly mortgage payments until I find a job.  I'd still like to get a cheaper insurance if possible after I take the money out so if anybody can offer any good life insurance companies out there.  I really don't want to take anything from my 401K accounts yet. My wife is working but has financial commitments of her own.  I'm a non smoker and in good health.  What are my options?
  
Not to nitpick, but you don't have term insurance.  Sounds like you have universal life, a form of permanent insurance.

RBirns said:   
legende said:   Hello.  Was wondering what options I have.  Am almost 48 yo with a wife and 2 teenage kids(one will be in college next Sept) and have a term life insurance with one of the major insurance companies that has a coverage of $516K and monthly rate of $180.  The cash balance is around $45K. Right now, I don't pay the monthly premium of $180 and just let the the interest cover that.  My unemployment just ran out in NJ and I'd like to start taking some or take the money out completely to cover my monthly mortgage payments until I find a job.  I'd still like to get a cheaper insurance if possible after I take the money out so if anybody can offer any good life insurance companies out there.  I really don't want to take anything from my 401K accounts yet. My wife is working but has financial commitments of her own.  I'm a non smoker and in good health.  What are my options?
  
Not to nitpick, but you don't have term insurance.  Sounds like you have universal life, a form of permanent insurance.

  Or return of premium term. That would explain the high price. Perhaps his insurance company shows what the cash value looks like from an accrual standpoint? Some gimmicky crap.

jaytrader said:   
RBirns said:   
legende said:   Hello.  Was wondering what options I have.  Am almost 48 yo with a wife and 2 teenage kids(one will be in college next Sept) and have a term life insurance with one of the major insurance companies that has a coverage of $516K and monthly rate of $180.  The cash balance is around $45K. Right now, I don't pay the monthly premium of $180 and just let the the interest cover that.  My unemployment just ran out in NJ and I'd like to start taking some or take the money out completely to cover my monthly mortgage payments until I find a job.  I'd still like to get a cheaper insurance if possible after I take the money out so if anybody can offer any good life insurance companies out there.  I really don't want to take anything from my 401K accounts yet. My wife is working but has financial commitments of her own.  I'm a non smoker and in good health.  What are my options?
  
Not to nitpick, but you don't have term insurance.  Sounds like you have universal life, a form of permanent insurance.

  Or return of premium term. That would explain the high price. Perhaps his insurance company shows what the cash value looks like from an accrual standpoint? Some gimmicky crap.

  
With return of premium term, you can't "let the interest cover" the premiums.  He's describing universal life.

Hi All. Thanks for all the responses. Sorry, it sounds like, yes, it's a universal life insurance instead. You think there is a chance for withdrawals will be tax free since I'm unemployed at the moment?

And, yes, I will seriously think about getting term life instead before withdrwaing. Can't believe I've put off this until now. People really need financial education!

legende said:   Hi All. Thanks for all the responses. Sorry, it sounds like, yes, it's a universal life insurance instead. You think there is a chance for withdrawals will be tax free since I'm unemployed at the moment?

And, yes, I will seriously think about getting term life instead before withdrwaing. Can't believe I've put off this until now. People really need financial education!

  
I assume you mean cashing out (surrendering) and terminating the policy.  Your job status has no bearing on the tax treatment.  With universal life, total monies received (including loans and withdrawals over the life of the policy) minus total premiums paid is taxable as ordinary income.  The fact that you're unemployed means you might be in a zero or low tax bracket, which could minimize the tax bill.  Conversely, the reported income could push you to a higher tax bracket or affect other benefits.

I'm a life insurance underwriter and with no job (earned income), going to be hard to justify allowing $500K in coverage. Once you get a job and income; however, that will no longer be an issue.

What do you mean your wife has her own financial obligations? Y'all are married aren't you? Her income is your income and vice versa.



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