Yes you can transfer the cash value in the whole life policy into another cash value policy (ie Whole Life to Whole Life, Whole life to Universal Life, etc) or into an annuity (such as variable and fixed annuities). Its called the 1035 exchange which you can move the cash value into another life policy or annuity without any taxes due.
But I wouldn't do that anyway unless you are nearing retirement and have nothing saved, then I would move the cash value into variable annuity. If this doesn't fit your description, then I would first check if there are any loans due on the cash value. You want to pay this off before exchanging it or canceling it because this loan will be considered as additional income when you do your taxes.
If there is no loan due, then I would first look around for companies that sells term insurance policies of 20 to 35 year. You should check out Primerica Financial Service. While some people don't like their business opportunity, their service to clients is excellent. They provide a customize, complimentary, and confidential financial needs analysis that can evaluate your current finances and makes recommendations on what you should do next to reach your financial goals. They also can help you create a game plan to get out of debt and also re-define your investments (meaning they can make improvements so that you can get a better performance). Its really a great company to do business with.
When you qualify for term insurance and you accept the policy, you will see your premiums will be significantly lower than what you pay for whole life. I would use the savings and invest it every month. With the cash value in your whole life, I would cancel the life policy and put the cash value into a Roth or Traditional IRA. If you have too much cash value (anything above $4000 if you below the age of 50 or above $5000 is you are age 50 and above), then save the rest and invest it later. If you have a spouse, have the spouse open an IRA too.
I have never sold whole life insurance because of the way they are designed. If they paid out cash value and death benefit, then I would say its an "ok" product. But I would still sell term insurance and keep the savings separate because you can afford the right amount of protection and achieve higher rate of returns in your investments. As your investments grow and as you get older, the need for life insurance declines. Eventually, your investments will grow so large that you don't need life insurance anymore and you become self-insured.
· 1 decade ago