Keep the life insurance or cash out the policy? | members only

THE PROBLEM Steven and Kathryn Burtch, both 62, bought whole life insurance after marrying in 1984. “My father always had life insurance,” says Steven, who purchased the policies both to

protect against disaster and to build wealth. Today, Steven’s policy has a death benefit of about $200,000 and a cash value of $93,000; Kathryn’s is worth about $70,000. But there’s a cost:

The premiums, rising about 11 percent annually, are now more than $2,000 a year. “Should we keep the policies for the death benefit?” Steven asked me in an email. Or should they cash out?

THE ADVICE Permanent insurance, such as the Burtches’ whole life policies, has both a death benefit and an investment component or cash value designed to grow over time. If a policyholder

dies, beneficiaries get the death benefit. But the holder can access the smaller cash value earlier by “surrendering” the policy. ASK JEAN CHATZKY If you would like Jean Chatzky to write a

column about helping you sort out a financial problem of yours, please send an email to [email protected]. Advice about surrendering can be clouded by conflicts of interest. Insurance agents

might favor keeping a policy. Financial advisers might prefer you cash out so they can invest the proceeds. Indeed, Steven’s insurance agent said to keep the coverage, and his financial

adviser said to cash out. So I turned elsewhere for help: Wisconsin-based actuary Scott Witt, one of the few fee-only life insurance advisers in the U.S. Rather than sell insurance, these

professionals evaluate policies people are thinking of buying, cashing out or reconfiguring. “This is not a cookie-cutter analysis,” Witt says. “If I had two clients with the exact same

policy, the advice for one might be to hang on till death and for the other to surrender.” Witt’s first question for Steven and Kathryn, who both work at a small private school: Do they need

the insurance for their family? Not anymore. They’re already well situated for retirement, thanks partly to Steven’s prior career in the corporate sector. Their two sons, both in their 30s,

live independently; they’ll be fine without any death benefit. How is their health? Kathryn’s is great, and Steven’s is under control with medication. Each comes from a long-lived family.