With the rough economy, I know some people are struggling to pay their bills. If one of those bills is a life insurance premium, here are some ideas of how to keep your policy’s benefits without breaking the bank.
1. Reduce the face value - For term and permanent insurance, most carriers will allow you to reduce your face value one time, which will lead to adjusted, lower premiums.
2. Reduce the premium - If you have a universal life or whole life policy with some cash value built up in it, you may be able to reduce your premium without affecting your policy’s guarantees. Or you might be able to skip a payment or several. In fact, some people may be able to stop making payments for years. Even if you’ve had a term policy, you may be able to skip or stop making payments if it was issued more than 10 years ago and if you added a return of premium rider. Note: BE VERY CAREFUL to check on how reducing your premium will affect the policy’s guarantees. Ask your agent or the carrier first before making any changes.
3. Purchase less expensive policy - Term prices have been coming down. You may be able to replace your current policy with a new one with the same benefits for lower cost. If you have a whole life policy, how about a 1035 exchange into a less expensive guaranteed universal life policy, if applicable? For example, many whole life insurance policy holders could cut their premiums in half by applying their cash value to a less expensive, universal life policy. They’ll still have coverage for life, but without the high costs. Of course, they’ll still have to be healthy to do this because they’ll have to apply for a new policy.
4. Reduced Paid-Up - Some permanent policies allow you to eliminate your premium payments completely by taking a lower, paid up death benefit. For example, you pay $1000 per year for $500,000 of coverage. Your reduced paid-up option might give you $150,000 of coverage for the rest of your life without paying another premium.
5. Sell your policy - Another option is a life settlement (for seniors). Why let the policy lapse or take reduced death benefit if you could sell your policy for 3 times the surrender value? You may be able to take the life settlement amount a purchase a single premium life insurance policy with it with a higher face value than the reduced paid up amount.
6. Ask for help - Last, what about asking your children (or whoever the beneficiaries are) to help with the premiums? If they are ultimately to benefit from the policy, they may be willing to subsidize your premiums or take them over completely. This especially makes sense if you’re not in great health.
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