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Dividends Part of Surrender Value


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I have a client that has an old State Farm Whole Life policy. He has had it since 1976. The statement says he has about $4,500 in cash value and slightly over 10,000 in dividends that accumulate interest.

His policy was originally 10,000 face amount but he called the local office and they told him it is now worth 15k in death benefit.

If he did a 1035 would the 10k in dividends be transferable to a new policy? If so, I can get him about 30k in a single premium at his age.
Yes. But I would be VERY cautious on that policy. The efficiency of a 40yr old WL policy simply cannot be beat. Moving the cash to another policy may well be a very bad move. Hard to say for sure without seeing all the details of what he has, but that is my gut feeling.

What is his current death benefit? What is the premium? What is the RPU option, if any? Why do you want to move him to SPWL? What is his goal for LI? How many beneficiaries? Lots of questions - and many more than those, imo...that need to be addressed prior to a change.
I'm hijacking the thread a bit here, but would you have a similar caution for:

2 (approx 40 yr) old whole life policies- Co A and Co B. Agent for Co A offers to take cash in both and turn into paid up policy with Co A?
His death benefit is approx 15k now (dividend accumulation plus cash value) original death benefit was 10k. I can get the guy at least 30k death benefit spwl. He has no need for the cash. It's a no brainer.
But doesn't that get into PFG's life insurance goals question to some extent?

If the interest rate is good enough, mighten it make sense to just let the dividends continue to draw interest?
His death benefit is approx 15k now (dividend accumulation plus cash value) original death benefit was 10k. I can get the guy at least 30k death benefit spwl. He has no need for the cash. It's a no brainer.

Face amount 10,000
Dividends. 10,000
Interest. ???

Death benefit, 20,000+
They told him if he died today the death benefit would be 15k

This seems to suggest that the insurance value of 10K in dividends is only 5K and the cash value of those dividends is even less.

Unless death benefit and cash value have gotten confused somewhere?
Because he's got the dividends accumulating at interest, versus purchasing pua's the actual DB is lower. I glossed over that on the first post. If he had selected purchasing PUA's, his total DB would be over $30k right now I'm sure. What company is it with?
I would find out what options he has for his $10k of div's right now. If he dies, that $ has to go to him also - it doesn't just disappear...which effectively puts his total paid out upon death at $25k right now. Since he's planning a legacy play, my guess is he might be able to tweak this policy going fwd to make it worth more than a SP will be over time.
Again, many assumptions on my part.
Op said State Farm.

And... you're teaching me. And I can compare things you and Bee said to a policy and they track.


to OP,

What PFG says makes sense to me. For example, will State Farm allow him to use the dividends to buy paid up ins within the current St Fm policy and then use future dividends to buy more insurance?

And I continually get in trouble with not thinking enough about detail and not using the right vocabulary words (i.e. what customer service types can recognize) when asking about things-insurance included.

It sounds like your client needs to inquire back from State Farm about what the total cash disbursed to his beneficiary would be. Maybe you could look at his policy and do that on a conference call with him.

You may not make a commission on this transaction, but if you come off looking like an insurance genius, there will be more business to come.

(And to ground my comments, While I am not an insurance agent, I am a policy holder of a Penn Mutual policy of a similar age to your State Farm policy with smaller current values, but within 5K of what PFG is talking about.)
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