During financial hardships many of us have to decide what to pay and which bills to skip. At some point we may have to take a hard look at maintaining our life insurance policy. What If I Can’t Pay My Life Insurance Premiums? Is My Policy Cancelled?
If you’ve decided to skip paying your life insurance premium, you need to know a few consequences. These are going to revolve around to what exact type of policy you have.
With “term life” your coverage is simply going to lapse. Read your policy concerning a “grace period” but should you choose not to pay this one it simply means you are not going to have life insurance coverage.
Should you have a “whole life” policy you have a few more options. You may simply want to:
Cash the policy out which means you would stop paying the premiums but college the cash savings that has accrued in the account. Again, you would no longer have life insurance coverage.
You may have the option with a whole life policy of using the “reduced paid up option” in your policy. This would allow you to stop making premium payments but retain life insurance for your family. You would see a reduction in your death benefits and no cash savings.
Another option with your whole life policy is to simply to convert the permanent policy to an extended term policy for a time period based on the accumulated cash savings in the policy.
Some insurance companies will allow you to reinstate the policy if it does lapse within a certain time period. You may have to go through the physical examination again but this could be an option. You of course would also have to pay back the premiums you would have paid plus interest.
But don’t simply ignore this situation. Read your policy and contact your agent. You are not the first person to find themselves with this problem.