dangraham_78
Hi all,
In reading through the threads related to the type of policy I have, I ended up with some questions. Since I don't know how much info is needed to assess my questions, I'll give a good bit of detail n the policy and my finances after my questions. Also, you should know that I have NOT called my agent about my questions yet. I wanted to gather some info first. (I think it's a good sign that the same agent who sold me this policy in 1979/80 is still in business though, even if I haven't spoken with him in 10 or 15 years.)
And thanks in advance to all who will take the time to read through this and offer your opinions.
Dan
Questions
---------
1) My policyholder statement for 2008 includes a statement that says "Based on Guaranteed Interest, guaranteed cost of insurance, and maximum expenses, this policy will lapse on 05/09/2012 if only scheduled premiums are paid." I think this means that if I pay ONLY the recommended premium of $138 per month, then on May 9th of 2012 my death benefit will go to zero. Is that right? If so, this is my first point of confusion. If I'm paying my premiums, why would my death benefit ever go to zero?
2) If this policies death benefit is going to zero in 2012, I was thinking I should simply surrender the policy, collect my small cash value (see the details below for why it's small), and get insurance somewhere else to keep my total death benefits in a reasonable range. BUT, someone mentioned in another thread that with this type of policy (which was written before 1985 (or thereabouts)) had some tax benefits that it might make sense for me to take advantage of. Since I pay the premium with dollars that have already been taxed, then any special tax benefit would be due to tax deferred growth, right?
3) If I pay more than the recommended $138 per month, will the policy stay in force after 2012? (Or does only my agent know for sure. . . )
4) The policy guarantees 4.00% return on excess premiums. If my cost of insurance is $55.29 per month (from my annual statement) and I pay $138, that means that the difference ($82.71 per month) earns the 4% return. Is that right?
5) The "maximum premium limit" for this coming policy year is $91,628. The annual premium is $1656. Again, if I were to pay the max does that mean the difference of about $90000 is earning 4% in a tax deferred account? (I can't pay the max by the way, I'm just trying to make sure I understand this whole thing.)
6) And lastly, given all of this, should I start upping my contributions to this policy (I could do between $200 and $500 per month in contributions), surrender the policy and find something different to replace the $150K death benefit with (if so, what would you recommend replacing it with), or do something different than either of those?
Here are the details of my policy.
--------------------------------
Penn Insurance and Annuity Company
Flexible Premium Adjustable Life Insurance, Independence Builder I
$150,000 death benefit (plus cash value)
Purchased in 1979 or 1980
After 3 to 5 years of paying the "recommended premium", I hit a rough spot and my agent told me I could pay a reduced premium and just cover the cost of the insurance. Mostly through laziness on my part, I've been paying that reduced premium ever since.
Cash Value: $623
Current Interest Rate 4.00%
Guaranteed Interest Rate 4.00%
The insurance costs $55.29 per month. (This is about what I pay per month).
The annual recommended premium is $138 per month
My general finanical situation:
----------------------------
I'm 51. My wife is 44. Daughter is 13.
My other insurance is about $450K (through work)
Wife's other insurance is about $250K (through her work)
There are "accidental death" adders that would add about $250K to either/both death benefits if we died in the "right" way.
I earn $144K (plus a sometimes bonus in the 5 to 15K range)
Wife earns $82K (plus a sometimes bonus in the 5 to 15K range)
Current savings in various 401K's, IRA's, etc. is around $500K
I save:
10% to ESOP plan (generally do NOT sell this stock when I get it. Instead I tend to use it for "special" stuff like landscaping, etc.)
10% to 401K (2% match on first 6%, $2K max match per year.)
5% to deferred compensation
Wife saves:
15% to TIAA/CREF account
In reading through the threads related to the type of policy I have, I ended up with some questions. Since I don't know how much info is needed to assess my questions, I'll give a good bit of detail n the policy and my finances after my questions. Also, you should know that I have NOT called my agent about my questions yet. I wanted to gather some info first. (I think it's a good sign that the same agent who sold me this policy in 1979/80 is still in business though, even if I haven't spoken with him in 10 or 15 years.)
And thanks in advance to all who will take the time to read through this and offer your opinions.
Dan
Questions
---------
1) My policyholder statement for 2008 includes a statement that says "Based on Guaranteed Interest, guaranteed cost of insurance, and maximum expenses, this policy will lapse on 05/09/2012 if only scheduled premiums are paid." I think this means that if I pay ONLY the recommended premium of $138 per month, then on May 9th of 2012 my death benefit will go to zero. Is that right? If so, this is my first point of confusion. If I'm paying my premiums, why would my death benefit ever go to zero?
2) If this policies death benefit is going to zero in 2012, I was thinking I should simply surrender the policy, collect my small cash value (see the details below for why it's small), and get insurance somewhere else to keep my total death benefits in a reasonable range. BUT, someone mentioned in another thread that with this type of policy (which was written before 1985 (or thereabouts)) had some tax benefits that it might make sense for me to take advantage of. Since I pay the premium with dollars that have already been taxed, then any special tax benefit would be due to tax deferred growth, right?
3) If I pay more than the recommended $138 per month, will the policy stay in force after 2012? (Or does only my agent know for sure. . . )
4) The policy guarantees 4.00% return on excess premiums. If my cost of insurance is $55.29 per month (from my annual statement) and I pay $138, that means that the difference ($82.71 per month) earns the 4% return. Is that right?
5) The "maximum premium limit" for this coming policy year is $91,628. The annual premium is $1656. Again, if I were to pay the max does that mean the difference of about $90000 is earning 4% in a tax deferred account? (I can't pay the max by the way, I'm just trying to make sure I understand this whole thing.)
6) And lastly, given all of this, should I start upping my contributions to this policy (I could do between $200 and $500 per month in contributions), surrender the policy and find something different to replace the $150K death benefit with (if so, what would you recommend replacing it with), or do something different than either of those?
Here are the details of my policy.
--------------------------------
Penn Insurance and Annuity Company
Flexible Premium Adjustable Life Insurance, Independence Builder I
$150,000 death benefit (plus cash value)
Purchased in 1979 or 1980
After 3 to 5 years of paying the "recommended premium", I hit a rough spot and my agent told me I could pay a reduced premium and just cover the cost of the insurance. Mostly through laziness on my part, I've been paying that reduced premium ever since.
Cash Value: $623
Current Interest Rate 4.00%
Guaranteed Interest Rate 4.00%
The insurance costs $55.29 per month. (This is about what I pay per month).
The annual recommended premium is $138 per month
My general finanical situation:
----------------------------
I'm 51. My wife is 44. Daughter is 13.
My other insurance is about $450K (through work)
Wife's other insurance is about $250K (through her work)
There are "accidental death" adders that would add about $250K to either/both death benefits if we died in the "right" way.
I earn $144K (plus a sometimes bonus in the 5 to 15K range)
Wife earns $82K (plus a sometimes bonus in the 5 to 15K range)
Current savings in various 401K's, IRA's, etc. is around $500K
I save:
10% to ESOP plan (generally do NOT sell this stock when I get it. Instead I tend to use it for "special" stuff like landscaping, etc.)
10% to 401K (2% match on first 6%, $2K max match per year.)
5% to deferred compensation
Wife saves:
15% to TIAA/CREF account