DEAR DAVE: I want to get out of my whole life policy. Should I formally close out the old policy, or just stop paying the premiums?
DEAR ANONYMOUS: 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.
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