One year into my Whole Life policy

Last month I coughed up my 2nd annual premium, which I set at a level I could sustain paying even if my income took a 10% hit. Sadly, that decision was made just weeks before the Manic Money Panic (my infinitely more accurate term than “economic downturn”) struck. No, this is not another post bleating about my change in circumstances and overreaching – it’s about the silver lining despite the 30% hit my income has taken.

I recently got a check from my whole life provider for a dozen bagels shy of $400. It was sent in error – I had set the policy up to reinvest…ugh, what do they call them, bonuses? dividends? Before you think I’m a complete moron for not knowing something so basic about something I’m putting so much money into, I’m just getting the terminology a bit garbled because I know this product better in its British form, where it’s referred to as a “With Profits Endowment” and is often used to pay the principle in conjunction with an interest-only mortgage. Not sure if that’s still the case today though, my info and bi-dialectalism is a decade old. Anyway, the point is that in addition to its modest guaranteed rate of growth, it earned an additional $400 based on the company’s performance. That’s a return, for lack of a better word, of 4.36%. Of course, this is all fairly irrelevant because the policy has a cash value of about $0 for the first couple of years and isn’t even worth what I put into it for the first 10-13 years. I do, however, get to see the future minimum value change as well as the increased death benefit. Of course, that only happens if the $400 is re-invested as intended, so I sent the check back and had my adviser/agent rectify the admin error that resulted in a tempting (but taxable) check.

If I’m still having difficulty meeting the premium next year, I’ll ask if my dividend/profit/return/bonus can count as part of that premium. After all, my advisor said that by the time the policy is worth the same as my deposits, the bonus will be approximately equal to the premium and can pay for itself if I so choose. So why not before that, if necessary? I hope it’s not, but I like having options.

Yes, I know Suze Orman doesn’t like this financial instrument – it’s not suitable for everyone, but I chose it for reasons I’d rather not share, pretty much all related to being self-employed. And as much as I currently regret the amount I selected to pay into it, I’m otherwise reasonably happy with the home my retirement money has found.

3 Responses

  1. so who listens to Suze Orman? (last i read, she doesn’t follow her OWN advice! lol)

    • Eh, last time I wrote about my whole life policy, I had a few people question the wisdom of that move, often quoting Suze Orman – so I put in that little bit at the end.

  2. It’s awesome to hear that you resisted the tempting $400 check. It’s always nice to know that others, however tempting it may be, are realizing the potential in long term security that doesn’t harshly effect current reality.

    You will thank yourself in 10-13 years.


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