Life insurance is pretty much a must-have policy for anyone nowadays, and most people who can afford it have more than just one policy. However, the promise of future protection for your family does come at a cost, quite literally! In case you have recently discovered that the premium you are currently paying for your policy/policies is just too much to bear, rest assured that you are not the only one to make the mistake and more often than not, there are ways to get out of it.
Be Careful from the Start: Choose the Right Plan and Policy
There are primarily, three types of life insurance policies to choose from, namely, term life insurance, universal life insurance, and whole life an expert for help deciding on what type of life insurance it is that you need exactly, how much should you insure yourself for, and what kind of a premium are you looking at by selecting a certain amount.
When you are sure about such important parameters beforehand, making the right choice for life insurance plan and policy automatically becomes a lot easier. Even if you have made a mistake, consider ending it if it really proves too much of a burden and start anew with a clear idea of what you can afford and how much you need.
Don’t Over Insure Yourself
Taking up a policy that just doesn’t provide a sufficient coverage is not a good idea because it fails the very reason why you took life-insurance in the first place; providing adequate financial security to your family in the event of your death or getting access to a well-developed nest egg on maturity.
However, over-insuring is not ideal either because of the reasons that we will get to in the next point. After all, you can always take up another policy if you think your current coverage is not enough, but the insurance company may not give you the choice to downgrade if you end up over-insuring.
Improve Your Credit Score to Lower Your Insurance Premiums
The good news is that even if you do fail to pay insurance premiums, it won’t be reflected on your credit score, as you did not take a loan to begin with. However, having a poor credit score will increase your premiums. Therefore, by removing negative elements from your credit score and increasing the total credit score to a more respectable number, you are liable to get a lower rate of premium from all insurers.
What Happens If You Stop Paying the Premiums?
If you stop paying the premiums on your life insurance policy, you will likely get an extension period and a few calls from your insurer, but eventually, one of three things will happen, depending on the policy’s directives and your communication with the insurer.
Cash out – You will be able to collect a percentage or even more than what you have paid, depending on the policy and for how long you have paid the premiums. Tax deductions, fines, etc. may or may not be levied on the amount before the final cash out number is calculated.
Non-forfeiture – The insurer will reduce the death benefit and eliminate the cash savings permanently, but you won’t have to pay them anymore.
Lapsed Policy – The money could be completely forfeited, alongside your death benefit and cash savings, if the policy lapses due to non-payment or otherwise. In such situations, the insurer may or may not allow a revival of the policy, possibly with fines and perhaps a higher premium!
It is, in general, better to negotiate with the insurer for a less expensive plan, a cash out or at least a non-forfeiture, if you value the money you have already paid.