Dave Ramsey says: Insurance agent gave bad advice on taking loans
I have a whole life insurance policy with zero cash value due to loans I took out per the advice of my agent.
I finally realized this wasn’t a smart move, as I now owe premiums plus interest every year.
Am I still on the hook for the policy loans if I forfeit the policy to buy term insurance?
No, you are not. Get your term insurance in place first, then when you cancel the policy your cash value will offset your loans.
They won’t loan you more than your cash value. It’s seldom that they will loan you 100 percent of cash value, so you might actually have a cash value that is above your loan amount.
If they have loaned you the full amount of your cash value, it’ll be an exact break even, and just canceling the policy means you cancel the interest and cancel the premiums.
It was bad advice to buy the policy, and even dumber advice to clean the whole thing out and sit there paying interest to borrow your own money and pay a premium to keep the loan open.
I recommend 10 to 12 times your income on a 15- or 20-year level term policy.
During that 15 or 20 years, of course, you should be getting out of debt and building wealth so that you have a big pile of money and no need for life insurance.
- The five types of shoppers you’ll see on Black Friday
- Dave Ramsey says: Plan ahead to budget for dream house
- Dave Ramsey says: Parents shouldn’t feel obligated to help kids pay off debts
- 7 tips for spending less money, more time together this Thanksgiving
- Dave Ramsey says: Single people can pave solid financial path by saving