I Can No Longer Afford My Monthly Life Insurance Premium

Posted in Life Insurance

February 2nd, 2009

With the economy in a tailspin, many people are evaluating their budgets and looking for opportunities to cut costs. If you can no longer afford your monthly life insurance premiums, the effects on your policy will depend on the type of coverage you have previously purchased.

Perhaps you opted for term-life insurance as you are between the ages of 20-50, and wanted to provide for your family until your children were no longer dependent. If you can no longer afford your monthly life insurance premiums, a lapse in coverage would be the result. With your lapsed coverage, if you perish during that time period, your family would not be able to make a claim.

There are other types of life insurance where the situation may not be so bleak when you fail to make payments. If you have permanent life insurance, there will be another outcome. Permanent or whole life policies cover the life of the insured, and if the policy is kept current it accrues cash value and a payout is guaranteed at the end of the policy. If you cannot afford to pay the premium on this type of life insurance policy, you can cash out your investment. Some companies may also allow a few missed payments and provide a renewal period. If your policy has a non-forfeiture option, then the money you already paid in can be used to pay the premiums (although the benefits will be reduced).

Before committing to a life insurance policy, it is important to consider the long-term financial goals and needs of your family. Make sure to choose your policy wisely, as there may be times where you find the premium too costly. Depending on the type of policy you have, if you can no longer afford the premiums of your life insurance policy, the news may not be all that bad.