When an insured policyowner can no longer keep making premium payments on his life insurance policy, there are several options available.
Cash in the policy
The policy may be cashed in. Depending on the cash value of the policy, this may be a good choice for elderly insureds who need funds to pay for their home care and other living expenses. However, if the cash payout the insurance company has offered is miniscule, cashing it in may not be feasible.
Allow the policy to lapse
Another option is to let the policy lapse by stopping making premium payments. This may be the worst option since the policyowner will lose the policy and the premiums paid into it.
Have the beneficiary pay premiums
The insured may make an arrangement with the beneficiary to pay premiums. This is a good option in cases where the beneficiaries can afford making premium payments and are interested in keeping the policy in effect in order to get the life insurance benefits in the future.
If the beneficiaries are the children of the insured, they may cover the insured’s living expenses and premiums in exchange for the insured’s promise to make them irrevocable beneficiaries on the life insurance policy.
Selling the policy on the open market
The insured who can no longer afford making premium payments, may sell her policy to an investor on the open market. Selling a life insurance policy this way is called a life settlement. A life insurance policy is a valuable asset that can be sold to investors willing to buy existing life insurance.
Often, these investors are insurance companies themselves.
The amount of money offered for a life insurance policy will depend on the insured’s life expectancy calculated by actuarial life tables used by life insurers. The older the insured is, the shorter his life expectancy will be and the higher the amount investors will offer for the policy. This amount may be as high as three times the amount of a cash-in amount the insurance company offered.
In a life settlement, the investor who buys the policy will own the policy and will be responsible for making premium payments. The policyowner will get a cash payout that he may spend on covering living expenses, home care and medical care.
If a life insurance policy has become too expensive to maintain, you have several options. Which one is the most feasible to you will depend on the specifics of the life insurance contract and the policy value.
If you are seeking advice about a life insurance policy or a denied life insurance claim, we are here to help. Our life insurance lawyers are legal professionals in the field of life insurance law who provide zealous representation to life insurance policyowners, insureds and beneficiaries whose life insurance claims have been unfairly denied or delayed by insurance companies.
To speak with a life insurance attorney, call our life insurance law firm now for a free consultation. Call (888) 510-2212.
Call (888) 510-2212 for a free consultation.