Life Insurance?

iVillage Member
Registered: 06-05-2007
Life Insurance?
5
Thu, 01-01-2009 - 9:36pm

I need another perspective ladies.
My DH's mom signed over a life insurance policy last year (without my knowledge as I had already told her twice we did not want it). It is for 50,000 and is whole life insurance. The kicker is they borrowed against this policy, so we currently owe $2400 on this policy which I must pay the interest on every year. I take my debt really seriously, and I feel like she just dumped her debt on my plate. We can't just write a check for this, and DH just doesn't understand why I am so upset about it. He refuses to cash out the policy as it has a cash value of 4,500. We have more than enough life insurance without this policy, but what do I do? Do I just let it go and pay off the stupid 2400 that isn't my debt, or do I keep bugging DH to cash it out so it isn't a point of contention anymore?

Is it typical for people to borrow against life insurance policies and create debt on the policy? I am just not well educated in this field.

Thanks,
Jolie

Photobucket
Photobucket
Photobucket
iVillage Member
Registered: 03-03-2004
Fri, 01-02-2009 - 11:52am

I don't know a lot about life insurance myself.

Avatar for jenud97
iVillage Member
Registered: 03-29-2003
Fri, 01-02-2009 - 12:15pm

I am with you. I wouldn't have wanted it either! Maybe you could do some kind of chart to show DH how it is not cost effective to pay on this policy! You could be applying your payments to your other debt and get out of your own personal hole quicker. Plus if you cash it in now, maybe you can pay off some more of your own personal debt.


Hope you get it worked out!

Jennifer


Jennifer

 

 

iVillage Member
Registered: 10-25-2005
Fri, 01-02-2009 - 12:21pm

I hope this info will help. I have a whole life policy that my parents got for me when I was born. I didn't pay the premiums for several years, and thought it was gone. As it turned out, the insurance company had set up the premiums to go into a "loan" and I was paying interest on that loan every year, without even knowing it. All the while, the dividends were paying towards the cash value. So the cash value was going up, and the loan balance was too! I went in and spoke with the insurance agent, and set it up to pay off the loan with the cash value, and have all future dividends pay towards the premiums. So now my yearly premium is less each year after dividends have been applied. If I understand correctly, and I wouldn't place bets on it, the cash value is what the policy will pay out above and beyond what the policy is written for. So if the cash value is $4500 and the policy is written for $50,000, at the time of death, the policy would pay $54,500, less the $2400 loan. If I were you, I would go and speak with the agent and ask some questions. ITA that you don't want to be paying interest on this loan your MIL took out if you can help it. My mother says that this could depend on what company the policy is through, but it works that way with the company they went through. I really hope this info helps you out without having any bad contentions with your MIL or DH.


ETA: In addition, you can always take the cash value and pay off your other debts as well. Cash value should NOT affect the value of the insurance policy. A $50,000 policy will pay $50,000 upon death, regardless of the cash value, unless the cash value is a negative figure. After paying of the loan, you should have an additional $2100 in cash value that can be taken in the form of a check, or be used to pay future premiums. I hope this makes sense. If you have any questions, I will try to answer them, but I would highly recommend you speak with the agent.



-Jan


Photobucket

Photobucket Special thanks to Katie (Hubbswifey) fo
iVillage Member
Registered: 06-05-2007
Fri, 01-02-2009 - 2:06pm
That does make sense. Right now the dividends do pay the premium, so we only have to pay the interest and any $$ we can pay on the "loan." DH says, "If I die it will be worth 50,000 and 2400 is beans." I get that, but it just makes me cranky that they did this to us, and I hate the fact that I owe money that I did not have a part in creating.
Photobucket
Photobucket
Photobucket
iVillage Member
Registered: 08-19-2007
Wed, 01-07-2009 - 7:56pm
I have a whole life policy my parents got me when I was a kid. The company no longer sells this type, so when I am 35 I either have to cash it in, or convert it to something else. The main reason I am keeping it is b/c the premiums are low as opposed to getting a term policy and having low premiums now, but when I'm 60 I wouldn't be able to afford the 4k a yr premiums. I only have 20k+ in my whole life and about 40k+ from work which costs literally cents a month.