What if I can't Afford my Premiums?

With the economy continuing to struggle, many people are looking for ways to save some money and tighten up their budget. That usually means going over their monthly expenses and trimming anything they might deem unnecessary. One of the first things that typically get cut is the life insurance policy. Despite evidence otherwise, some people simply believe their families don't really need life insurance. While you may not need it to actually survive, life insurance is really the only way to protect your loved one's future. It's definitely not something that should ever be completely cut out because you never know when you'll need it. Here's an overview of your options if you can't afford to pay your life insurance premiums

Term Life Insurance

Unfortunately, if you cannot afford your premiums for a term life insurance policy and fail to pay them, your policy will lapse. There's not much you can do if you allow your policy to lapse, however you may be able to work something out if you contact your life insurance company beforehand. You might be able to adjust your policy, so that it pays out a smaller benefit but also has smaller premiums. If your situation improves in the future, you could go back and increase it's benefit.

Permanent Life Insurance

Depending on the type of permanent life insurance you have and the policy's specific details, you may have several options if you can no longer afford the premiums. Here's a look at a few general options most companies offer:

• For most people facing a policy lapse, the best option is to simply cash it out. If you've been paying into your permanent life insurance policy for several years, you may have substantial savings in your policy. You can use that money however you want now, but keep in mind that you may have to pay taxes for cashing it out early.
• Should you allow your policy to lapse, some insurance providers may actually allow you to renew it within a certain time frame. There is a catch though, your premiums may increase and you may have to go through portions of the application process again, such as having a medical exam. While your rates may be slightly higher, they'll still probably be less expensive than those from a new policy.
• Finally, some policies have what's referred to as a non-forfeiture option. This basically allows you to use whatever savings the policy has accumulated to pay for the life insurance, although that may be at a reduced benefit. Of course, this is completely dependent on how much you've managed to save in your policy's investment vehicle.