Consider them before giving up your coverage.
- Life insurance can become too expensive to maintain.
- There are steps you can take to reduce your costs, such as rethinking your policy term and reducing your death benefit.
- It is better to have some level of life insurance coverage than none at all.
If you have people in your life who depend on you financially, it is important to have life insurance. But what if you’re having trouble fitting those bonus payments into your budget?
The cost of living is rising everywhere these days. And even if your premium is the same as you’ve always paid, you may be reaching the point where you can’t afford it anymore. If so, you have options. Here are three that are worth checking out.
1. Switch from whole life to term life
The type of life insurance you have could make the difference between higher monthly premiums and lower premiums. If you currently have a whole life insurance policy that you’re having trouble paying for, you might want to swap it out for term life insurance instead.
The advantage of whole life insurance is to get coverage for the rest of your life. Additionally, your insurance policy may accumulate cash value that you can draw on or borrow from (this reduces your policy’s death benefit, but that’s an option).
But the downside to whole life insurance is that it can be prohibitively expensive, costing far more than term life. Term life insurance only covers you for a predefined period of life and does not accumulate cash value like whole life insurance does. But it’s a lot cheaper, which means you might have an easier time paying. And it’s better to have term life insurance than to keep a whole life insurance policy that eventually expires because you can’t manage the cost.
2. Reduce your death benefit
You may want to bequeath a generous death benefit to your loved ones. But if that higher benefit is costing you too much, you might want to consider getting less coverage.
Let’s say you have a policy with a death benefit of $1.5 million. It’s a great gift to give to your loved ones, but if it’s not in your budget, you might want to upgrade to a $1 million death benefit instead, or something even smaller. .
3. Rethink your policy duration
Perhaps you have 30-year term life insurance in place. But if you find you don’t need such long coverage, reducing your coverage window could result in lower costs.
Imagine you have a 30-year term life insurance policy in your 30s and your main goal is to protect your children. Well, chances are your kids can earn a living in their 20s, in which case a 20-year term life insurance policy might suit your needs just fine.
Don’t Just Drain Your Life Insurance
If your life insurance becomes harder to pay due to rising bills or other circumstances, you might be tempted to give it up. But before you do, remember why you put this coverage in place: to protect the people you care about.
As such, it pays to do everything you can to avoid having to go without life insurance. You may need to rethink your level of coverage or the type of life insurance you have, but again, it’s better to have some amount of life insurance than nothing at all.