Q&A: Should I Take the Cash Value From My Life Insurance Policy?

Q&A: Outliving Life Insurance

Question: My concern is outliving my life insurance. I’m 73, and the cash value of my whole life policy tops out at age 79. Right now its value is about half of the death benefit amount. My coverage ends at age 91, but there’s a good chance I’ll live longer than that. My wife, who is 71, also might live longer than 91.

If I were to die first, she would need the death benefit because my military pension ceases upon my death. The pension didn’t offer a survivor benefit initially. Later, when it was available, I would have had to buy back in, and we decided that was too costly, so that’s why I bought the life insurance. I’ve been thinking about taking the cash value from the policy and using it to build up our savings or else taking a loan from the policy. What’s your opinion?

Ric: You need to keep the policy as is, because your wife depends on that death benefit. 

You should also see if you can obtain additional coverage, or coverage that lasts beyond age 91.

Make an appointment with us. We need to evaluate your complete financial situation to determine whether the two of you are managing your finances ideally. I share your worry that your wife faces financial risk if you die first, and I’d like to explore opportunities for fixing that problem for you.

Originally published in Inside Personal Finance September 2016

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