I want to get out of my whole life policy. Should I formally close out the old policy, or just stop paying the premiums?
Close out the old policy once you have a good, term life insurance policy in place. I recommend 15- to 20-year level term insurance equal to 10 to 12 times your annual income. For instance, if you make $40,000 a year, you should have $400,000 to $500,000 in coverage.
Term life insurance is much less expensive than whole life. Plus, did you know that you lose the part of your whole life policy known as the “savings plan” or “cash value” when you die? They only pay the face amount of the policy. So, close it out and stop pumping money into that thing!
But don’t leave yourself uninsured. Make sure you have the proper coverage in a term policy first. There is never a good time to save money inside a rip-off, whole life, cash value insurance plan!
* Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.