Life insurance provides financial security for loved ones, but paying the premiums can become difficult over time. Whether due to retirement, a change in income or unexpected expenses, many people find themselves unable to keep up with their life insurance payments. If you are wondering what to do if you can’t afford your life insurance anymore, this guide is for you.
We’ll explore your options, including how the type of policy affects your choices and whether a life settlement is the best path forward. You’ll learn the best options that let you stop paying life insurance premiums without losing out on your policy’s value.
TYPES OF LIFE INSURANCE POLICIES
The type of life insurance policy you have significantly impacts your options when you can’t afford the premiums. There are generally two types of policies: term life insurance and permanent life insurance. Each comes with different rules and possibilities:
Term Life Insurance
Term life insurance provides coverage for a specific period, such as 10, 20 or 30 years. If you stop paying the premiums, the policy will simply lapse, and you will no longer have coverage. Furthermore, there is no cash value associated with term life insurance, so you won’t get any money back.
Permanent Life Insurance
Permanent life insurance policies, such as whole life and universal life, are policies that never expire, provided the premiums are paid. These policies also accumulate cash value over time, offering more options if you are struggling to pay the premiums.
Understanding the type of policy you have is the first step in evaluating your options when you can no longer afford your life insurance.
OPTIONS FOR A LIFE INSURANCE POLICY YOU CAN NO LONGER AFFORD
When faced with financial difficulties, you might wonder, “What happens if I can’t pay my life insurance,” or “Can I simply stop paying my life insurance premiums?” Fortunately, there are several options to consider:
- Convert to a permanent policy: Some term policies allow you to convert to a permanent policy, which could give you more flexibility.
- Reduce your coverage: One of the easiest ways to lower premiums is to reduce the death benefit amount. This decreases your coverage but makes the policy more affordable. Contact your insurance provider to see if this option is available for the type of policy you have.
- Use the policy’s cash value: If you have a permanent life insurance policy, you can temporarily use the accumulated cash value to cover the premiums. This option keeps your coverage active while you sort out your financial situation. However, depleting the cash value could lower the death benefit.
- Take a policy loan: Permanent life insurance policies often allow you to borrow against the cash value. This provides immediate financial relief without canceling the policy. Keep in mind that any unpaid loan balance, including interest, will reduce the death benefit.
- Use dividends or interest: Some policies pay dividends you can use to cover the premium payments.
- Switch to reduced paid-up insurance: You can use the cash value to purchase a smaller, fully paid-up policy with no future premiums.
- Seek a premium waiver: Some policies include a waiver of premium rider, which allows you to skip payments during financial hardship or disability. Check with your insurer to see if you qualify for this feature.
- Surrendering the policy: If no other option works, you can surrender the policy for its cash value. This permanently cancels your coverage but provides an immediate cash payout. However, surrendering a policy may involve fees and tax consequences.
LIFE SETTLEMENTS: A VALUABLE ALTERNATIVE
Another option for a life insurance policy you can no longer afford is a life settlement. This allows you to sell your policy to a third party for a lump sum that is higher than the cash surrender value but less than the death benefit.
A life settlement is usually available for seniors aged 65 and older with high-value policies. It’s an excellent option if:
- You no longer need your policy or cannot afford the premiums.
- You want to receive a lump sum payment and avoid any future premiums.
- You need the money for medical bills, retirement expenses or other financial needs.
At Life Settlement Advisors, we specialize in life settlements and can guide you through the process. We help policyholders get the most value from their life insurance policies, turning a financial burden into a valuable financial resource.
CHOOSING THE BEST OPTION WHEN YOU CAN’T AFFORD YOUR LIFE INSURANCE ANYMORE
Deciding what to do when you can no longer afford your life insurance premiums depends on your financial goals and circumstances. Here’s how to choose the best option:
- Evaluate your needs: Determine whether you still need life insurance coverage. If your children are grown or you have built up other financial resources, you may no longer need the policy.
- Check the terms of your policy: Review your policy’s terms and conditions. Understanding your options can help you make an informed choice.
- Consider the tax implications: Some options, such as life settlements and policy loans, may have tax consequences. Consult a financial advisor to understand any potential liabilities.
- Think about your beneficiaries: Reducing or canceling your policy will impact your beneficiaries. Consider their needs before making any decisions.
- Get professional help: Navigating life insurance options can be complex. Life Settlement Advisors provides a personalized consultation to explore all your options.
CONSULT AN EXPERIENCED LIFE SETTLEMENT EXPERT TODAY
Struggling to pay for life insurance does not mean you are out of options. Whether it is reducing your coverage, borrowing against your policy or pursuing a life settlement, there are ways to manage the cost without losing all the benefits. The best choice depends on your financial needs and the type of policy you have.
If you are considering a life settlement or want to explore your options, reach out to Life Settlement Advisors. Our team of experts can provide a personalized consultation to help you make the best decision. Contact us today to learn more.
