After much consideration, my husband and I have decided to cash out one of my life insurance policies. In the past year, we each got new life insurance policies that fit our needs much better than the one that I had from before he and I were married. Today, I took the first step towards cashing out that policy.
There are many reasons why we want to cash out this particular life insurance policy. The face value of the old policy is one twenty-fifth the value of the new policy. If I die, the new policy will pay off whatever is left of our mortgage, and will give my husband enough money to continue the lifestyle he is used to. The old policy cannot.
We have some credit cards that we have been struggling to pay off, little by little. Our life would be better if we could knock out that debt in one shot. Cashing in the old policy would give us the funds to make that happen. Once that debt is gone, we are hoping to use the money that was earmarked for the debt on something better, like perhaps a health insurance policy. Right now, we cannot afford health insurance.
It turns out that cashing in a life insurance policy is not a simple task that can be accomplished with one phone call. The insurance company had a very loud automated message for me, that talked about tax information. There was a voice activated system that wanted me to speak the digits of my account number into the phone. Guess what happens if you manage to fail at that more than three times? That’s right, you end up connected to an actual person.
The first person I spoke with had me verify who I was three different ways. He asked how he could help me, and I explained that I wanted to cash out my life insurance policy. This required him to transfer me to a second person, who also made me verify who I am before continuing.
Now, my husband did some checking through the insurance companies website, and knew about how much we would get if we cashed out the policy. The insurance agent told us approximately the same amount. So far, so good.
But then, things got perplexing. The agent warned that once we cash out the policy, it would be gone, forever. I knew that, but hearing him say it made me think that perhaps what I was about to do was bad. This feeling increased when the agent said that they don’t make policies like this one anymore.
He suggested we re-route the dividend payment to cover the cost of the premiums. This would make the policy much less expensive to maintain, but wouldn’t give us the money we want to use to pay our debt. The agent suggested that we take a loan from them instead of cashing out the policy, but the last thing we want is another loan to pay back. We decided that the best course of action is to wait. Our next step is to call our new insurance company, and make absolutely certain that my new life insurance is all good, before we cancel the old one.
Image by Andrew Magill on Flickr
Also see: Cash In Your Life Insurance Policy