A few points come to mind, if your insurance policy is over 10 years old.
1. Do not assume you have a whole life policy. Most policies sold in the 80’s and 90’s are universal life, UL.
2. Do not assume your policy will last the rest of your life.
Think of a universal life policy like a car. It uses gas (premium) and oil (cash value) to keep it going. You have a destination (life expectancy). Your goal is to have enough oil to make it to your destination. How much do you need? A read out of your current situation exists. That crucial information, a policy projection, may be on your annual statement. If it’s not, request a current illustration from your carrier. It is also called an in-force illustration or in force ledger. Generally you can requested one current illustration at no charge.
The key point is that many universal life policies over 10 years old have serious problems. The car (policy) was badly designed, the oil (cash value) is in bad shape and car is going to seize up (lapse) and it’s going to happen well before your life expectancy, like in your 60’s or 70’s.
What to do? Trade in your policy. It’s the same concept as trading in your old car for a new better preforming car.
If you are in good or fair health, apply for new coverage and transfer the cash value of your old policy into a new policy (called a 1035 exchange).
If you are poor health, you may be able to put in more premium (gas) and the policy will last longer. If you cannot fix your life insurance policy with additional premium to project beyond your life expectancy, and you cannot trade it in because of poor health, you may wish to consider cashing it in. In a badly flawed universal life policy, the car’s oil pan is going to drop before you reach your destination.
A good life insurance agent and broker like myself who concentrates on life insurance is likely better than a financial planner. Many call themselves financial planners with varying degrees of qualification. Even those who are qualified financial planners don’t concentrate on life insurance and keep up with its multiple options for carriers and products.
Note: If you have a whole life policy, not universal life, this trade in advice does not apply. Make sure your policy or policy statement clearly states whole life on it. If it states something like flexible premium adjustable life insurance, it is a Universal Life, UL, policy.
Most newer universal life policies under 10 years old are guaranteed universal life or no lapse universal life with lifetime coverage guarantees at a fixed premium.
If you do not get an annual statement, you likely have term life insurance. If it is over 10 years old make sure you know how long it lasts and how long it is eligible for conversion. Term conversion is your trade in option. Your health doesn’t matter for conversion. You get the same health rate you got when the policy was taken out.
post script: One-third of life policies were purchased over 10 years ago. Lives and needs change.