What to do with life insurance policy

[Golfing Doc]

My wife has had an insurance policy since 1994 and we are unsure if we should continue paying premiums or cash it in. We are a two physician couple and both have term life policies (1 mil, 1.5 mil... slightly low I know but we figure that the other spouse will continue to work if one of us dies) with one child and a mortgage slightly less than our annual salary in a medium COL area.

I looked in to the details of the policy and I can't tell if it's whole life or variable universal life. It's an Axa IncentiveLife policy that was started in 1994 and has had premiums paid since then. My wife's parents were paying the premiums up until 6 years ago when we took over payment.

If the premiums were very expensive, we'd probably stop paying them, but it's only $164 a year. The face amount of $100,000, current death benefit is $127,480, net cash surrender value $27,480, and the total premium payment amount to date is $14,028.

Should we keep paying the premiums or cash it in? We don't really need to death benefit given her term policy of 1.5 mil. What would the tax hit be if we cashed it in?

[Peds]

if you have held it for >20 years it actually might be paid for and not horrifically terrible to keep.

i will defer to the number crunchers coming soon....

[jfoxcpacfp]

Axa can calculate the taxable amount for you - just call and ask. I'd lean toward simply cashing it out and investing the net proceeds but I'm not crunching any numbers just so @Peds won't have to defer to me  .

(Truthfully, I'm lazy.)

[Hank]

Get an in-force illustration.  Evaluate this insurance policy as an investment going forward without regard to the sunk costs.

[Jason Veirs]

As others have mentioned, call AXA and get an "As Is" inforce illustration prepared in order to see how long the policy is projected to last, assuming the policies current cash value and the annual premium contribution of $164. AXA should also be able to tell you whether it's a VUL, UL, or WL policy, in addition to whether or not there is a taxable gain.

Based on the figures that you provided (net cash surrender value $27,480, and the total premium payment amount to date is $14,028), there appears to be a taxable gain, but AXA would be able to tell you for sure. The good thing is that you're now past the Surrender Charge Period, which is typically around 15-20yrs on a WL policy.

Hope this helps.