Whole Life Insurance doesn’t pay

Like many other parents at the time, my parents were trying to do the ‘prudent’ thing when they decided to purchase a small $1,000 whole life policy when I was born “years” ago.

Over time, the policy had a cash value of about $750 which my parents were forced to borrow when my father lost his job. Sadly, every bit of money – even only $750 – was important to support a household of seven kids.

The first of my parents to pass away was my mother. She died of emphysema caused by years of heavy cigarette smoking. Five years later and my father died. It was then that I found this small policy (and its loan balance) on my life among the papers I sorted through to settle their estate.

Anyway, reviewing the policy and tiny loan repayments my mother scratched out from time to time left me feeling sad for their struggles to provide for a large family. And the more I looked at this policy, the more I felt that I should just go ahead and repay it for them. I didn’t have to. There was a small cash value to simply close the account, but I decided to make a series of small loan repayments. By doing so, I felt connected to what my mother was feeling when she made the small payments.

Once it was all repaid, the insurance policy had a cash value of about $1,650 (and death benefit of under $1,950). Factoring in the many years this policy has been outstanding, and the very modest accrued value, I have estimated that the annualized rate of return was less than 2%. Conclusion is obvious. It was (is) a bad investment and it didn’t even keep pace with inflation. But it is my link to my parents, and that’s certainly priceless.

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