I’ve had four people call me this week and tell me that they were shopping for term life because they can no longer afford whole life insurance in this down economy. One gentlemen borrowed from his cash value. His policy is about to lapse because he can’t afford the interest payments on the loan. Another gentlemen was laid off from his job as a marketing manager. One woman in her 40’s said that she just doesn’t want to make the payments anymore now that she knows how much more she can get if she had term life. And one last young man simply said he didn’t know what he was doing when he bought whole life and now that he has 2 children, his expenses have gone up, and the cost is no longer affordable.
Four different people who have all been affected by this down economy. They all want to make sure that their families are financially protected, but they can no longer afford their expensive whole life insurance premiums. Let’s take a closer look at what options are available if you can no longer maintain your whole life premiums.
Cash out your policy. Take out whatever cash value is available and stop paying your premiums. You will owe taxes on the cash value withdrawal if it is more than the premiums that you paid into the policy. You can use that cash value to purchase a single premium whole life or term life insurance policy or you can get a more affordable term life policy and make the payments annually or monthly.
Reduce your death benefit. Some carriers will allow you to reduce your death benefit based on the cash value in the policy. You can stop paying premiums and you will still have life insurance coverage, though a smaller policy.
Let your cash value pay your premiums. If you think you’ll be out of a job temporarily then you might be able to allow the cash value in your policy pay your premiums. This all depends on if you have the necessary rider on your policy. The premiums paid from the cash value would be considered a loan and will have to be paid back in the future.
These are just a few of the options that you have. Before you decide to cash out or let your life insurance policy lapse, you should consider your current financial situation. Is the inability to make your premiums payments temporary? Will you be able to make the premium payments again once you are back on your feet? You also have to consider your life insurance needs. If you don’t have enough coverage with a whole life insurance policy, then you should probably consider term life instead, because you’ll be able to get more insurance coverage for less money.
One last thing to consider is your health. If you have some health issues such as cancer or heart disease then it might be difficult to qualify for an affordable term life policy. Be sure to speak with an experienced agent about your situation before you let your current policy go. You can also get free quotes to compare other types of policies.
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