Dave Says: Whole Life for Adult Kids?

Dear Dave,

My husband and I have about $50,000 in debt. It started piling up several years ago when one of our sons was injured. He’s 33, his brother is 23, and we’ve got whole life insurance policies on each of them. The combined cash value of the policies is about $21,000. Should we sell them in order to help pay down our debt?

Lori

Dear Lori,

You’re not responsible for the final expenses of a 33-year-old or a 23-year-old. And the fact that they’re your sons doesn’t change anything.

Whole life insurance is a horrible investment. The rate of return is almost nothing. When someone dies with these policies, the extra money you paid to create the cash value is wasted, because the insurance company keeps the cash value. They only pay out the face value! That’s not what I call smart investing.

If it were me, I’d cash in both of the policies immediately. Now, if either of them has become uninsurable and you want to transfer a policy to them, that’s fine. Otherwise, they both need to take care of their own insurance and other financial needs.

You guys are staring at a lot of debt, and $21,000 will go a long way toward cleaning up that mess. Cash them in!

—Dave