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Cancelling Universal Life Policy

February 17th, 2011 at 08:44 pm

The last joint account that my ex-husband and I have is a universal life insurance policy. The benefit amount is 300k on him, 130k on me, and 5k riders on each child. We are still splitting the cost and it has a small cash value (I think right around $1900). Our daughter is 20 and married, living in another state with her husband who is in the Army. Our son is 15. As we are no longer married, the chance of us dying together is quite small. I feel we no longer need this policy. I told ex-husband this several months back, but he wanted to keep it.

Additionally, I have a 50k term policy with ex-husband being the beneficiary. I would like to change that to 50% each child. They are already the primary beneficiaries of my retirement funds.

Ex-husband called me today and says he wants to cancel the universal life policy. He needs his half of the cash value and doesn't want to keep paying the premiums. He says he will up the term policy he buys through work. I said that is fine with me.

So, he will be cancelling that soon and I will be receiving my half. I have thought it over today, and I think I will put my half into my Roth.

Also, my life insurance costs will decrease by $28 per month. I plan to send $25 to my emergency fund and allow another $3 for "everything else".

My emergency fund should break the 10k mark in April. I think that is enough of an e-fund for someone with credit card debt, so after breaking 10k, I will direct those dollars to B of A Visa.

2 Responses to “Cancelling Universal Life Policy”

  1. LuckyRobin Says:

    Sounds like a good plan to me. Will you have to pay taxes when you cash out the policy?

  2. Petunia 100 Says:

    Some of it might be taxable. A return of your own capital (the excess premium part) is not taxable. The cash value earns interest, and that is taxable. There have been stretches of time where the premiums ate into the cash value, I don't know if that is deemed as coming from interest or from excess premium.

    At any rate, I will be glad to have my last account with ex-husband closed! Smile

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