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Kim Said:

should we cancel our whole life insurance policy?

We Answered:

It completely depends on why you bought the insurance in the first place. Whole life is for needs that don't go away (IE: funeral costs, final taxes, etc). Term is for temporary needs (IE: paying out debt, making sure the kids are taken care of until they are old enough to take care of themselves etc.).

If you are considering cancelling this policy just to following the Buy Term and Invest the Rest strategy, DON'T DO IT! It is a seriously flawed theory and most of the books that have been written about it have flawed calculations in their numbers and compare old whole life policies to current term rates to make it seem better. For some it works out, but very few.

Insurance should not be bought as an investment alone. Insurance is good for providing for your family, protecting your estate and in some cases a tax shelter. The 'investment' part should be considered more of a bonus to buying whole life and not the entire reason, unless you are looking at tax sheltering if you're a high networth individual.

You're best bet is to contact a third party insurance broker and ask their opinion on whether to cancel it or go over your options if you can make it paid up with the cash value or something. Make sure the person offers both term and whole life insurance. If you go to the guy that sold it to you, he may just tell you to keep it so he keeps the commissions (depends on how he's compensated and if he's a good advisor or not). If he sold it to you strictly as an investment, get a new advisor, he's likley nothing more than a U/L slinger selling U/L to everyone that walks through the door.

Alfredo Said:

Should I invest in a Roth IRa or Variable Universal Life Insurance Policy?

We Answered:

First of all, your age ? If under 35-39 UL is a good deal, mortality charges are minimal, and you should be able to stop payments in 20 years easily, and still have the full benefit death insurance.

12% return is ridiculous long term, look at some 7% to 9% numbers. This is more likely. Also what is the guaranteed interest rate of the particular policy you expect to buy ? What company, etc. ?

The Roth is good also. If you have a few extra bucks, do both !
But the insurance should not be $200 a month, too much ! Who are you doing business with ? For $200 a month, you should be able to do both if you are in the age bracket I am guessing.

Sounds like your financial advisor is an insurance salesman!
Met Life, NY Life, or Prudential maybe ? Get away from him !