Cashing a life insurance policy?

**Hoosier Momma** · 04-01-2008, 10:07 AM

So, we are doing the TMM and one of the things Dave advises is that cash value life insurance policies are BAD. Well, I have one that my mother purchased for me when she worked for an insurance company many years ago.

Dh says that we should cash in that policy and take the $ and throw it at debt (then get me some real insurance, lol). He is more than adequately insured thankfully.

I agree, but I have some concerns:

*Is this money taxable?

*When I call the insurer (MetLife), do I just say that I want to cancel my policy and receive the $ proceeds?

*How long does this usually take--I am not desperate to receive the funds right away since we are receiving our tax refunds in the next week to week and a half, but I want to know if it is a relatively painless process. I don't have tons of time to make oodles of phone calls.

TIA!

**kellydoeshair** · 04-01-2008, 10:55 AM

do you have your emergency fund yet?
if not I'd put that in the savings account just to be safe

**dancar3** · 04-01-2008, 11:19 AM

I just did this same exact thing myself! I had a Universal Life policy that I got about 17 years ago and thought, hmmmm..........Dave said these kind of policies are a waste of money and term life is better. So after much thought, I cashed it out while getting a term life policy in place. For me, the whole process from the time I called my agent to tell him I wanted to cancel my policy and start up a term life AND getting my money was only 3 weeks. I had to have tests done again for the term life policy and then had to wait for the results come back, wait for the new policy to be set up and then the check came.......for me the check came in the mail Saturday! I am having a ball paying 8 cc's, 1 dr.'s bill, and completely funding the Emergency Fund, now I just have 4 big cc's left. Btw, no the money is not taxable because the money we are cashing out is the exact money we put into the policy......you don't get interest, at least I didn't. Good luck and if you have anymore questions just let me know.

**forHISglory** · 04-01-2008, 11:25 AM

I recently did the same thing. We've reached a point in life where we didn't need the life insurance any more. It was easy to do.

**Hoosier Momma** · 04-01-2008, 11:36 AM

Well, we are receiving $10K+ from federal return and almost $1900 back from two states, so our EF is coming from there. Not to mention that we are receiving the rebate of $2400 in May.

By the time all is said and done we will have paid off our car, my student loan, a LOC, some medical bills, a few small credit card balances, and we will just be left with dh's student loan and the mortgage.

I don't think the policy has much more than $2000 in value, but I could be wrong. Even that would go a long way. We could throw that at dh's student loan and it would take that much less time to get rid of it (we are thinking within a year if all goes well--it's over $5K right now).

**Hoosier Momma** · 04-01-2008, 02:37 PM

Well, I called after lunch and I have a value of almost $2300 on the policy. I have some paperwork to fill out and send back but it sounds like it will take a couple of weeks to get my $ when it is all said and done.

This money is going towards dh's student loan, which will make us able to pay it off hopefully by this fall!

**dancar3** · 04-01-2008, 02:54 PM

Sounds great........and you also had a few more hundred than you thought!

**mombottoo** · 04-02-2008, 02:41 PM

We used the cash value to extend the coverage without us having to pay any more premiums. Life insurance through work is great, so long as you continue to be employed. But, if something happens and you aren't able to work you lose your coverage. Dave may think cash value life insurance policies are a waste of money, but term insurance rates go up as you age...not so with whole life...those premiums are based on your age at the time you purchase the policy.