Unnecessary Whole Life for Adult Kids

Lori and her husband are up to their eyeballs in debt. They have two whole life insurance policies on their sons. The cash value is $21,000. Should they sell those policies to help cover some of their debt?

QUESTION: Lori in Indiana and her husband are up to their eyeballs in debt. The debt started racking up when their son was seriously injured several years ago. They have two whole life insurance policies on their sons. The cash value is $21,000. Should they sell those policies to help cover some of their debt?

ANSWER: Why would you keep them? Why are you responsible for a 33-year-old when he dies? You’re not, so that takes care of that one. The 23-year-old probably has the same answer.

Whole life insurance is a horrible investment. The rate of return you make on your money is almost nothing. When someone dies, the extra money you paid to create the cash value is wasted because they keep the cash value. If someone dies, they only pay the face. It’s not a good investment, and you’ve got life insurance on people who you don’t need life insurance on.

The son who was injured can go get his own insurance since he’s not uninsurable. I would cash both of these policies in immediately. You have no need for life insurance on a 33-year-old child. If you’ve gotten it on them and they become uninsurable and you want to transfer it to them, that’s fine. Otherwise, they need to have their own life insurance when they’re 33. That’s their job to take care of their life. You guys are in a mess. You’ve got $40,000 and $50,000 worth of debt, and $21,000 will go a long way toward starting to clean some of that up. Yes, I would cash them in.

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