Five Ways To Keep Your Life Insurance When You Cant Afford Premiums
Tighter budgets and a slumping economytwo reasons why more and more Americans are allowing their life insurance policies to lapse. According to a survey conducted by LIMRA in 2010, the life insurance research group headquartered in Windsor, Connecticut, about 35 million American households are not covered by life insurance. The study shows that more than 40 percent of Americans dont consider life insurance a priority and would rather spend their premium amount on what they consider to be more necessary expenses.
But before you decide to relegate life insurance to the bottom of your priority list think about why you bought life insurance in the first place. Rather than forfeiting your life insurance policy, consider the advantages of keeping your life insurance policy and the kind of options you have for making your policy affordable, even in hard economic times.
Allowing your policy to lapse could cost your family thousands of dollars extra so dont be penny-wise and pound foolish. No one knows when an unfortunate incident may strike your family. Without life insurance, the unexpected death of an earning member of the family would leave your family unprotected and vulnerable to financial tragedy compounded by the grief of losing a loved one.
A new life insurance policy will cost you. Maybe youve allowed your policy to lapse thinking youll buy a new one when your finances improve. Before you let your existing policy go, consider the cost of buying a new life insurance policy at a later date. If your existing policy was purchased 5 or 10 years ago, the next time you apply for life insurance, your premiums would definitely go up. The age factor itself would hike your premium rates, and any age-related health factors youve picked up along the way might send your premiums skyrocketing.
Heres what you can do:
Consider dropping some riders. Riders like waiver of premiums, accident rider, child riders and others cost extra. Some life insurance companies will allow you to drop a rider and thereby lower your premiums. Ask your insurance company or agent about how dropping a rider or two would impact your premiums. If this is possible, youll need to find out whether you can buy these riders back without having to go through a medical exam to prove insurability all over again.
Reduce your coverage. Many life insurance companies will allow you to adjust your coverage. Reducing your coverage will bring down your premiums. This option would be beneficial only if you can increase your coverage without having to prove insurability.
Look for group life insurance policies at your workplace. Although the death benefits may not cover all your life insurance needs, workplace life insurance is worth checking out since having a policy is better not having one. When you are in a stable financial position, you should supplement your workplace life insurance with a private term life insurance policy.
Use the cash value of your policy to pay your premiums. If your whole life policy has accumulated enough cash value, you can use the cash accumulated to pay for premiums.
Shop around for life insurance. You may be paying more than you need to on life insurance. The life insurance industry is highly competitive. Underwriting systems differ from company to company resulting in variations in life insurance quotes. The odds actually favor consumers and online life insurance quote providers offer great discounts sometimes up to 70 percent. Compare your existing rates with what other top-rated life insurance companies are offering you. Youll find cheaper life insurance policies through multi-brokers who have thousands of life insurance policies on their database. Such brokers offer free life insurance quotes online and can easily help you find you an inexpensive term life insurance policy. Online services are forcing competitive rates in the life insurance industry. You just might find cheaper rates than what you are currently paying.
Most life insurance policies have re-instatement provisions. Life insurance companies give policyholders 3 years after the policy has lapsed to re-instate it, provided all premiums on the policy are paid in full and a medical exam shows that their health has not significantly changed. If youve let your policy lapse, find out from your company how you can have it re-instated.
There are several options you can consider before allowing your policy to lapse. Life insurance provides financial protection for your family against your death. Its even more essential to have a policy in place when you cant afford it because thats the time youre family is most vulnerable financially and considering the tough economy were living in, your family would definitely need all the help it can get if you were to die unexpectedly.
by: Denise Mancini