Why Won’t My Agent Let Me Cancel My Whole Life Policies?

Summary

Podcast Summary: Ramsey Everyday Millionaires

Episode: Why Won’t My Agent Let Me Cancel My Whole Life Policies?
Release Date: June 30, 2025
Hosts: Dave Ramsey, Rachel Cruze
Description: This episode delves into the pitfalls of whole life insurance policies through a real-life case study, offering practical advice on financial management and investment strategies to build and preserve wealth.

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Introduction

The episode kicks off with Dave Ramsey introducing a caller, Mike from Philadelphia, Pennsylvania, who seeks advice on his life insurance policies. Hosted by Dave Ramsey and Rachel Cruze, the discussion centers around evaluating the necessity and financial wisdom of maintaining multiple whole life insurance policies in Mike's situation.

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Mike's Financial Situation and Concerns

Mike's Profile:

• Age: 70 years old
• Insurance Policies: Four whole life insurance policies
  • Intentions: Cash in three policies; keep one to cover funeral expenses
  • Surrender Value of Three Policies: $70,520
• Debt Status: No debts; homes and cars are fully paid
• Savings and Investments:
  • IRA Accounts: Three traditional IRAs and one Roth IRA
  • Other Accounts: Additional Roth accounts with a different company
  • Total in Accounts: Approximately $700,000
• Liquid Cash: About $10,000
• Dependents: Just himself and his wife

Mike’s Query: Mike is contemplating cashing in three of his four whole life insurance policies but faces resistance from his insurance agent, who argues that the policies provide financial security for his daughter and currently, his wife.

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Advice from Rachel Cruze and Dave Ramsey

Rachel Cruze’s Initial Assessment: Rachel begins by assessing Mike's situation, confirming that there are no dependents reliant on his income. She probes further:

• Rachel: "What would your wife do if something happened to you?" [01:08]
• Mike: "The house is paid for. She'd still get part of my pension and Social Security." [01:14]

Rachel evaluates the financial implications:

• Monthly Income for Wife: Approximately $2,200 to $2,300
• Additional Savings if Policies are Cashed In: $70,000

Rachel’s Recommendation: Given Mike's substantial retirement savings and lack of immediate financial dependents, Rachel advises:

• Cancel All Three Whole Life Policies: "I would cancel all three of these, Mike." [01:57]
• Utilize the $70,000 for Funeral Expenses: "Put in a high yield savings. Cash is king on this." [02:28]

Dave Ramsey’s Support: Dave echoes Rachel’s sentiments, emphasizing the unnecessary burden of maintaining these policies:

• "You don’t need to keep those policies. Get the cash back and get out of this bad product." [04:01]

Tax Implications: Rachel addresses potential tax concerns:

• Rachel: "You’ll probably have to pay for the growth on life insurance... depending on what they invested it in." [02:30]
• Dave: "Talk with your tax pro... If the payout is more than what you've paid, you will pay taxes." [03:59]

Final Decision: Ultimately, both Rachel and Dave concur that Mike should surrender the unnecessary policies, freeing up capital that can be better utilized or kept liquid for peace of mind.

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Illustrative Investment Comparison

Investment Calculator Exercise: Rachel and Dave demonstrate the financial impact of Mike’s decisions using the Ramsey Investment Calculator:

• Historical Investment: Mike contributed approximately $1,000 annually for 40 years into whole life policies.
• Actual Accumulated Surrender Value: $70,000
• Potential Investment Growth:
  • At a 10% return, Mike’s investments could have grown to approximately $632,400.
  • Rachel: "He would have had an additional over $600,000. And now he has $70,000." [06:27]
  • Total Potential Investments: $1.4 million had he invested instead.

This stark comparison underscores the inefficiency and poor return on investment associated with whole life policies.

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Discussion on Life Insurance Types

Term Life vs. Whole Life Insurance:

• Rachel’s Advice: "Get term life at Zander Insurance." [08:31]
• Dave’s Personal Insight: Dave shares his rationale for having substantial term life insurance, highlighting affordability and adequate coverage without the drawbacks of whole life policies.

Life Insurance and Peace of Mind: Both hosts agree that sufficient term life insurance provides peace of mind without the financial strain and poor investment returns associated with whole life policies.

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Engaging Banter and Audience Takeaways

Towards the end of the episode, Dave and Rachel engage in light-hearted conversation, using metaphors and anecdotes to reinforce their financial principles:

• Median Quotes:
  • "The king needed a taster to ensure his food wasn't poisoned, just as you should 'taste' your insurance products before committing." [08:35]
  • "Four coffee beans in an espresso martini signaled poison back in the 1930s." [08:49]

These exchanges serve to make the financial advice more relatable and memorable for listeners.

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Key Takeaways

1. Evaluate Insurance Needs: Assess whether whole life insurance policies are necessary based on your financial situation and dependents.
2. High-Return Investments vs. Insurance: Whole life policies often offer poor returns compared to traditional investment vehicles like IRAs.
3. Liquid Savings for Emergencies: Maintaining liquid assets can provide financial stability without the complexities and costs associated with whole life insurance.
4. Seek Professional Advice: Consult with financial and tax professionals before making significant decisions about insurance and investments.
5. Prioritize Cash Flow: Ensuring that your money is working effectively for you is paramount, rather than investing in low-yield insurance products.

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Conclusion

In this episode of Ramsey Everyday Millionaires, Mike's case serves as a cautionary tale about the hidden costs and inefficiencies of whole life insurance policies. Hosts Dave Ramsey and Rachel Cruze provide clear, actionable advice, advocating for the surrender of unnecessary whole life policies in favor of more effective financial strategies. The episode emphasizes the importance of understanding financial products, making informed decisions, and prioritizing investments that yield better returns and financial security.

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Notable Quotes:

• Dave Ramsey [00:05]: "This episode is brought to you by SmartVestor..."
• Rachel Cruze [01:08]: "Yeah, yeah. And you have no one dependent upon your income right now, Mike, do you?"
• Rachel Cruze [01:57]: "I would cancel all three of these, Mike."
• Dave Ramsey [04:01]: "You still want to get that money out because it's not doing you any favors."
• Rachel Cruze [06:25]: "You would have had an additional over $600,000. And now he has $70,000."
• Rachel Cruze [08:31]: "Get term life at Zander Insurance."

This episode is a valuable resource for individuals questioning the value of their whole life insurance policies and seeking guidance on optimizing their financial portfolios for better growth and security.

Transcript

[Dave Ramsey]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor all right, let's go to Mike in Philadelphia, Pennsylvania. Mike, how can we help today?

[Mike]

Hi, yes, I had a question about my life insurance policies. I'm 70 years old. I have four whole life insurance policies, which three of them I would like to cash in. One I wanted to leave for when I do die. It'll pay for my funeral. And the. I have no debt. Cars paid for, houses paid for, all that stuff. And I just. It accumulates up. The surrender value on those three policies would be $70,520. And I'd like to know. My insurance agent is trying to tell me not to cash it in. He says, you know, what about your daughter? When you die, you know, you want to leave us some money, but she's going to be sitting pretty anyway because she's going to get the money for my house and all that stuff, you know, so.

[Rachel Cruze]

Yeah, yeah. And you have no one dependent upon your income right now, Mike, do you?

[Mike]

Just me and my wife.

[Rachel Cruze]

Okay. What would your wife do if something happened to you?

[Mike]

I don't know. Good question. But like I said, the house is paid for. She'd still get part of my pension. Okay, sign to that when I got it. And Social Security.

[Rachel Cruze]

How much will all that equal a month for her?

[Mike]

Probably around 2200, 2300 dollars.

[Rachel Cruze]

Okay. And then you'll have 70,000 if you cash all this. And what. What else do you have saved?

[Mike]

I have a. I have a variable. I have three IRA accounts to traditional IRAs, and one is a Roth. And then I. And then I have a couple of other Roth accounts with a different company.

[Rachel Cruze]

Okay, how much are in all those accounts total? Would you say?

[Mike]

Every. About 700,000.

[Rachel Cruze]

Oh, amazing. Yeah. I would cancel all three of these, Mike, and pay for your funeral with the 70,000. I would. I mean, because how much are you going to be paying for this whole life policy that you're keeping? And your agent wants you to keep it because he's making a great commission off of it.

[Mike]

Right. And I'm still paying on three of the policies.

[Dave Ramsey]

Oh, that's why the insurance agent wants you.

[Rachel Cruze]

Exactly. Yep. So I would. I would drop them all, Mike.

[Mike]

Okay. And what. What should I do with that money, though? I mean, should I. Can I put it in, like, a savings account?

[Rachel Cruze]

Yeah, sure.

[Mike]

I'm gonna have to pay tax on it, right?

[Rachel Cruze]

Do I. Yeah, you'll have to probably pay for the grow with life insurance, whatever the capital rate. I'm not sure. Yep. I would talk to them to know the tax implications of that because the growth is different than just a standard investment, but depending on what they invested it in. Because that's what usually happens with whole life is they have invested that money in a really crappy investment. And so, yeah, dependent upon that. But I would ask them that to make sure. But I would just put that 70,000 in a high yield savings. And you can keep it there because do you have any liquid cash? I mean, everything else you were saying was tied up into investments. Do you have any just like cash in a savings, Savings account?

[Mike]

Yeah, about 10,000.

[Rachel Cruze]

About 10,000. Okay. So yeah, so I would take some of the 70 and put it there. If you want to invest some of it, you can. But you guys can just have a good buffer of high of. Yeah, just in a high yield savings. How old are you guys?

[Mike]

I'm 70. My wife is 68.

[Dave Ramsey]

Okay, how long have you been paying on. On the policies and do you have an idea how much you've paid over the. The life?

[Mike]

Well, the three that I want to sell, I've been paying into probably for about 40 years.

[Dave Ramsey]

Oh, gosh. About how much a year?

[Mike]

About a thousand, I guess. Something like that.

[Dave Ramsey]

All right. On the tax question, again, talk with your tax pro. But if the payout or the surrender amount is more than what you've paid.

[Rachel Cruze]

Put in, the growth on it you've.

[Dave Ramsey]

Put in, then you will pay taxes. So, but, but you know, just figure out what that is. But here's the. That doesn't change our opinion. Okay, you still want to get that money out because it's not doing you any favors. You don't, you don't need to keep those policies. They're not helping you at all. And Rachel explained that, right? Get the cash, do what she said to do with the cash, and cash is king on this and get out of this bad product.

[Rachel Cruze]

And you've done such a great job. Mike. I'm like to be seven years old, have everything paid for, $700,000 in retirement. So to your point, your daughter, your wife, everyone's going to be okay.

[Dave Ramsey]

Why keep the fourth one? And I know what you said, you said, I'm keeping the fourth one. I've got four, I want to surrender three. Why keep the fourth based on what we've told you? Because you're going to have plenty to cover your funeral.

[Mike]

Well, yeah, but I just figured that if I cash it in, the surrender value that is $7,800. But the death benefit is 11,004 50. So I figured that'd be enough for my funeral and maybe a nice dinner afterwards for everybody.

[Dave Ramsey]

A nice dinner. No, that's very nice.

[Rachel Cruze]

Just three grand difference, though, Mike. I just get rid of a crappy product.

[Dave Ramsey]

I would, too. I would get rid of it. You've got plenty of money and. Yeah. And you're going to earn plenty. You're going to live a long time. I can tell. So, you know.

[Mike]

I hope so.

[Dave Ramsey]

Put that money, gain the interest on it, as Rachel told you. You just don't need it. Get rid of them all. Get the cash back. You've paid way too much into these things for way too long.

[Mike]

Yeah. Right.

[Rachel Cruze]

Right.

[Mike]

Okay.

[Dave Ramsey]

Yeah, man.

[Mike]

Hey, thank you so much.

[Dave Ramsey]

Yeah, I appreciate the call. What a nice guy.

[Rachel Cruze]

So great.

[Dave Ramsey]

Wants enough to cover his funeral and a nice dinner for everybody.

[Rachel Cruze]

For everybody. After. That's what I'm gonna tell people. Go, have a great dinner. You know, I'm gonna do the same thing on your laptop. Will you pull up the Ramsey investment calculator?

[Dave Ramsey]

Yes.

[Rachel Cruze]

Okay. So Mike said for 40 years he was putting in. What did he say? $1,000 a year, I think, for these. For these accounts. I don't know if all. I wonder if it was just one of them or if it was all of them. I'm not sure. Okay.

[Dave Ramsey]

What do you want me to do?

[Rachel Cruze]

So he's 70 years old. So he's. And he's 30 years ago. 30 years ago.

[Dave Ramsey]

So age 30.

[Rachel Cruze]

Age 30 to age 70.

[Dave Ramsey]

Oh, I see what you're doing. And a thousand dollars, if.

[Rachel Cruze]

Is it per month on the calculator.

[Dave Ramsey]

What did he say? A thousand dollars a year.

[Rachel Cruze]

A year. So do like, just do a hundred bucks a month. There you go. Rate of return. We'll go 10 just to make everyone not freak out on us. God forbid we do 12%, but that is 10%.

[Dave Ramsey]

All right. Calculate. This is very exciting.

[Rachel Cruze]

I'm just curious. What?

[Dave Ramsey]

Oh, no. It would have been $632,400.

[Rachel Cruze]

You would have had an additional over $600,000. And now he has 70,000 y. That's how crappy whole life is.

[Dave Ramsey]

That shot to the shins, right?

[Rachel Cruze]

That hurts.

[Dave Ramsey]

That hurts.

[Rachel Cruze]

He would have had. He would have had 1.4 million.

[Dave Ramsey]

Yeah.

[Rachel Cruze]

In investments.

[Dave Ramsey]

Yeah. I mean, great point here.

[Rachel Cruze]

So just. That's. Yeah, that hurts. So everyone out there. That's how crappy whole life is. And for the actual insurance part of it, life insurance part. It's so expensive.

[Dave Ramsey]

Yeah.

[Rachel Cruze]

So Go get term life at Zander and just yes, at Zander Insurance, y' all, and call it a day.

[Dave Ramsey]

I've got so much insurance on me because I had three kids, right? And I mean, I'm. I've always looked at my wife sideways when I get in bed every night. You know what I mean? Because if I've been. If I've been a little cranky or not such a good hubs, you know, I might wake up.

[Rachel Cruze]

We up stars the other, like, literally this past year, I was like, are you going to try to kill me? Is this going to be like a 2020 Dateline? I'm telling you situation?

[Dave Ramsey]

I'm more valuable dead than I am alive. I promise you that. The kids are teenagers. She doesn't need me around the house anymore. I don't have to do baths. I don't have to do homework. I mean, what am I doing?

[Rachel Cruze]

Physical labor?

[Dave Ramsey]

But the point is, you know, why I got so much for peace of mind. And it's so unbelievably inexpensive.

[Rachel Cruze]

So cheap.

[Dave Ramsey]

It's so, so cheap. If you're decently healthy, it's going to be really cheap. And that investment calculator exercise, what a great exercise that was. Poor guy. Oh, man, $40,000 he's put in and.

[Rachel Cruze]

What that could have grown to, and now it's just 70,000 is what it'll be.

[Dave Ramsey]

And then the insurance agent is still sticking it to him.

[Rachel Cruze]

Oh, man.

[Dave Ramsey]

Come on, Mike.

[Rachel Cruze]

Such a bad product.

[Dave Ramsey]

Don't get it.

[Rachel Cruze]

Oh, look, they did it. There you go.

[Dave Ramsey]

They did it. Oh, they put it up there. Thank you, James. I know I should have plugged into my fancy little corner.

[Rachel Cruze]

Mike's doing great.

[Dave Ramsey]

Mike's doing.

[Rachel Cruze]

He's doing fine. He's doing fine. But, you know, this is a lesson for all of you listening.

[Dave Ramsey]

Yeah.

[Rachel Cruze]

Get term life insurance.

[Dave Ramsey]

Yeah.

[Rachel Cruze]

Do not fall for universal whole life. All these other policies, and if you.

[Dave Ramsey]

Get a lot of life insurance, get a taster. Somebody taste your food like the kings used to. You know, back in the medieval age, they were never sure if their food was poisoned. And so if they gave him a bowl of porridge, they had to have a taster.

[Rachel Cruze]

I believe it.

[Dave Ramsey]

And if that poor sucker keeled over, then the king was like, hey, I.

[Rachel Cruze]

Ain'T taking that porridge. So I had an espresso martini recently, and the bartender was telling us that they always drop three coffee beans in the top of an espresso martini, you know?

[Dave Ramsey]

Yeah. Ambiance.

[Rachel Cruze]

And they said, if there's ever four, don't drink it because it was a sign back in like the 30s or something. If they dropped four coffee beans it meant that it was poisonous. Oh and so look out Ken for your porridge and your pork.

[Dave Ramsey]

That's the last thing that bartender needed to tell you. Rachel. By the way, if you don't know.

[Rachel Cruze]

Her well, I believe it all.

[Dave Ramsey]

She's never ever met a conspiracy theory she didn't believe. I mean ever. So now PSA from Rachel.

[Rachel Cruze]

I don't know.

[Dave Ramsey]

Four coffee beans in the espresso martini. Run run, flee for the door the.

[Rachel Cruze]

Earth is not flat. I don't believe that one.

[Dave Ramsey]

Oh, that's good to know. Thanks for tuning in to Ramsey. Everyday millionaires need help with your investments? Connect with a smartvestor [e-mail] smartvestor or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.