Should I cash out a Variable Adjustable life insurance policy?

Should I cash out my life insurance policy?

• It's a whole life insurance policy that has about 30k - 50k paid into it I'm 19 and I currently have no payments because I've put so much into it so far I've had it since I was little and I'm heavily into investments and the stock market. So far since December I've turned $2,000 into $15,000 and I believe with my next new stock it will go from $1 a share to over $10 in May and then eventually be worth $40 after a year I have told some of my family about it and I'm getting another 15k for Christmas between 2 aunts, grandparents and an uncle. But I would like to maybe make an additional 250k - 1.7 Mill assuming things go according to plan with an extra 50k from my life insurance.

• Answer:

  Mbrcatz: This may have been set up as a tax sheltered investment, which would have been a VERY smart thing to do if his parents had piles of money they wanted to pass along to their kids, or if his parents planned on raising a money smart kid. This is a VERY common thing for people to do and one of the absolutely great things about a Universal Life/Whole Life policy. If it's used properly you can amass a HUGE tax sheltered investment that can be withdrawn tax free! Most "Buy Term Invest the Rest" type people don't bother learning about this benefit as they have brainwashed tunnel vision in that one theory. Without knowing your entire situation it is very difficult to give a complete answer, but consider this: 1) If you cancel you may not be insurable to get more insurance later on if you need it. 2) Based on your current age and the amount that has amassed in the cash value, I would assume the minimum premiums on this policy would be quite cheap. possibly cheaper or comparable to what a term policy would cost you now (depending on how young you were at the time). 3) If you cancel the policy to take the cash value, you will be taxed on the gains you made within the policy. Here's what I would do if I was in your situation and wanted to use that cash value: Take out a policy loan for the maximum amount (typically as long as there is 3-6 months worth of premiums they'll lend you the rest) they will allow you to borrow from the cash value. Here's why: 1) You're insurance policy will stay intact protecting your family, and securing your future so you don't have to worry about future insurability. 2) Interest rates are very low right now on borrowed money, so it's a prime time to borrow. 3) Depending on your local tax laws, the interest rate the insurance company may be tax deductable which means the interest rate is nothing to you anyways! If you are borrowing money for the intentions of making money (using it to invest in something) it's tax deductable in most states and provinces in North America. 4) You won't get taxed on the money that is pulled out of policy becuase you are taking out a "collateral loan", not "withdrawing the investments". You can't get taxed on borrowed money (just like taking a car loan...they use the car as collateral on the loan, and you don't get taxed on the money they give you). Leveraging (using other peoples money for you to invest with) is one of the keys to building massive amounts of wealth. Talk to the CEO of any company or any extremely weathly person like Donald Trump, Richard Kiyosaki (the Rich Dad, Poor Dad author). Even CitiFinancial, the owners of Primerica (who strictly promote Buy Term and Invest the Rest, and trash talk whole life), go against Primerica's advice and leverage millions of dollars in cash valued life insurance. It's the fastest way to build wealth. One thing to keep in mind, the markets go up and down all the time. It's great that you are doing well, but don't put all your eggs in one basket, especially with the world markets being a little shaky in some areas right now. Before you do this MAKE SURE YOU TALK TO YOUR INSURANCE AGENT! If one step is done wrong you could get nailed with a pretty big tax bill on this or collapse your insurance plan. Tax laws and insurance regulations are different in every state and different companies offer different solutions in these cases. Make sure it's done properly in accordance to local laws/company rules!