Should I Keep My Life Insurance Policy? 4 Questions to Ask

As people age and their circumstances change, many wonder: When is the right time to stop paying life insurance premiums? The decision should not be taken lightly, and there are many factors to consider before moving forward with this process.


The reality is, many people can no longer afford the premiums. Sometimes, the life insurance carrier chooses to increase premiums due to costs. Other times, the costs associated with a universal life insurance policy increase as you age. It’s common for people to underfund the policies, which leaves them with higher costs in their older years. Thousands of universal policyholders have found themselves billed hundreds or thousands of dollars a month extra to maintain their existing policies.


In the instance you find you can no longer afford life insurance or feel you no longer need it and don’t want to keep paying the annual premium, a life insurance settlement may be an option to consider. This means you can sell your existing policy to a secondary market rather than letting the policy lapse or surrendering it. Whoever purchases the policy then pays a cash amount to you, the original policy owner, that’s higher than the surrender value.


Should I Keep My Life Insurance Policy?


There are several questions to ask yourself before deciding if and when to stop paying life insurance premiums and seek a life settlement instead. Here are four:


  1. Do I need the coverage? Sometimes, policyholders purchase life insurance to cover the expenses of their mortgage or provide a financial cushion for their young children in case they pass away. But if you’ve paid off your mortgage and your children have grown up and are financially stable, you may no longer need the safety net your life insurance policy once provided. In that case, it may be more beneficial to settle your policy for a cash return now.


  1. Can I afford increasing premiums? When you sign up for your life insurance policy, the premiums are likely low and manageable. As you age, however, those premiums tend to increase. For instance, an analysis by ValuePenguin discovered that between the ages of 60 and 65, policies increase by 93% on average. If you can no longer afford the payments on your policy, it may be time to stop paying life insurance premiums.
  2. Can I afford all my medical bills? By selling your policy, you can get cash in your hands quickly. If you’re struggling financially, which often happens to older adults trying to balance overwhelming medical bills, this can be highly valuable. A 12-month analysis by West Health and Gallup found that nearly 7 million seniors could not afford their prescribed medication, and they’d withdrawn approximately $22 billion from their long-term savings to cover healthcare expenses.


  1. Am I financially prepared for retirement? Many people find that once they reach retirement age, they don’t have enough funds to comfortably retire. In fact, 17% of people age 45 to 59 have no retirement money saved. If you find yourself in this situation, settling your life insurance policy for a cash return could help you fill in your savings gap and still retire comfortably.


If you answered “no” to one or more of those questions, you may want to consider selling your life insurance policy by working with a broker to sell the policy in the secondary market. If you feel you no longer need coverage, reach out to one of our experienced life settlement brokers. We can address any life insurance policy questions you may have and get your policy appraised in the settlement market.