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What Happens if I Can’t Afford My Premiums?

Kris Sollenberger, Life Insurance Pro, Scottsdale

28 Aug 2017

“This is for all of you who have a whole life or universal plan.  It also goes to all of you who are still dragging your heels about making payments for the rest of your life.  Signing up for a whole life plan does not guarantee monthly payments forever.”  

There are a lot of you out there who have had a whole life policy for a long time now.  You keep paying the premiums every month along with all the other mandatory bills.  Well what if those bills start to mount up?  You’ve got to cut somewhere.  As we have discussed, life insurance is vital to a family, to you can’t let your policy go.  However, did you know there are ways to reduce your payments, or even stop payments altogether, all the while maintaining your policy?  Oh yes, I’ll explain.

There are a few options for you if you can’t afford to make your life insurance payments anymore.  If you have term insurance, you may be out of luck unless you were wise enough to purchase a return of premium rider to that policy.  This is for all of you who have a whole life or universal plan.  It also goes to all of you who are still dragging your heels about making payments for the rest of your life.  Signing up for a whole life plan does not guarantee monthly payments forever.  

The first option is extended term.  With this option you can stop payments on your whole life plan, and switch it over to term.  How long is the term?  Well, that all depends on the cash value of your policy.  Your face value will remain the same, and the policy expires at a date determined by the insurance company.  If you die during that term, your family would get the whole amount.  If you die after the term expires, your family will get nothing.  These types of policies can be surrendered for cash value anytime you chose.

A 1035 Exchange can be used if you have a WL policy.  This is used when someone wants to convert their old policy into a new one.  This exchange allows a person to take their cash value from an old policy, and transfer it into a new one.  You could transfer into a less expensive guaranteed universal life policy to save money and maintain your protection.

Reduced Paid-Up allows you to stop payments on your current whole life policy.  Your face amount gets reduced, but the policy remains for the lifetime.  The face amount just depends on a number of premiums you’ve already paid.  If the policy is a year old, you’re not going to have much.  However, if you’ve been paying premiums for decades, you will still have a lot of coverage.  This option is also available for a cash surrender at any time.

There are all sorts of policies you can sign up for that follow some of these rules.  There is Life Paid up in 20, which is just paying premiums for 20 years, then coverage remains for your life.  You can also sign up for a policy where you stop making payments when you turn a certain age, such as Life Paid Up at 65.  Give me a call, I promise you there is a policy right for you.  Cheers!

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