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What happens if you stop paying your life insurance?
If you stop paying your life insurance premiums, the insurance company will keep all the money you have paid in over the years and you receive nothing, other than your cash surrender value. The act of no longer paying premiums is called “lapsing.”
Did you know you can sell your life insurance?
Rather than letting your insurance lapse into a financial coma, you can sell your policy for what could be a substantial amount of money.
Mrs. Johnson is a 71 year old widow whose children had grown and had children of their own. While alive, her husband arranged for life insurance for the both of them. Mrs. Johnson still had her $1 million term life policy. She had looked at surrendering it since there wasn’t any real need for it anymore, but the life insurance company told her it didn’t have any cash value.
She was considering just letting it lapse to avoid her rising monthly premiums, but she asked her financial advisor if she had any options. Her advisor suggested that, instead of letting it lapse and receive nothing, she should contact a life settlement expert and see if there were any alternatives. Mrs. Johnson accepted a bid for $250,000 and was relieved to be in a better financial position, with no monthly premiums for her insurance policy.
As a single senior with a portfolio of financial responsibilities to manage, it was helpful for Mrs. Johnson to have a trusted financial advisor in place; however, it was even more important for her to ask about alternatives to paying higher premiums or losing the return on her investment. Mrs. Johnson set in motion what would end up being a significant financial improvement.
A life settlement was a great move for Mrs. Johnson, but it is not necessarily the right move for everyone. It is crucial to talk to your financial advisor and a life settlement expert in order to determine if a life settlement suits your finances. If it makes sense, a life settlement can be an excellent option for seniors who no longer want or need their life insurance policies.