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Every year I struggle with this issue. I have a $100,000 life insurance policy that has the following numbers:
2001: cash value $10,600, dividend $498, premium $766
2002: cash value $11,600, dividend $451, premium $766
2003: cash value $12,281, dividend $404, premium $766
2004: cash value $13,086, dividend $420, premium $766
2005: cash value $14,092, dividend $442, premium $766
2006: cash value $15,418, dividend $468, premium $766
2007: cash value $16,247, dividend $495, premium $766
2008: cash value $17,400, dividend $595, premium $766
This year I have to pay out ($766-$595) $171 to keep the policy going. Every year the cash value of the policy goes up by about $1,100.
I basically have $17k tied up and its value is increasing $929/yr ($1100-171) which is a 5% return. Not too bad in this market. However it is $171 out of pocket this year and will be $100 out of pocket next year. In 3 years the dividends will equal the premium and I won't have to make any payments.
If I cashout I will have to pay taxes on a $5,000 gain.
So the question is, do I keep this policy or not?
2001: cash value $10,600, dividend $498, premium $766
2002: cash value $11,600, dividend $451, premium $766
2003: cash value $12,281, dividend $404, premium $766
2004: cash value $13,086, dividend $420, premium $766
2005: cash value $14,092, dividend $442, premium $766
2006: cash value $15,418, dividend $468, premium $766
2007: cash value $16,247, dividend $495, premium $766
2008: cash value $17,400, dividend $595, premium $766
This year I have to pay out ($766-$595) $171 to keep the policy going. Every year the cash value of the policy goes up by about $1,100.
I basically have $17k tied up and its value is increasing $929/yr ($1100-171) which is a 5% return. Not too bad in this market. However it is $171 out of pocket this year and will be $100 out of pocket next year. In 3 years the dividends will equal the premium and I won't have to make any payments.
If I cashout I will have to pay taxes on a $5,000 gain.
So the question is, do I keep this policy or not?
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