When you’re healthy, it can seem unimportant to prioritize a budget for life insurance on top of your other financial responsibilities. You may be weighing the pros and cons of canceling your policy to make room for those other priorities.
However, before you ask your financial professional how to cancel your life insurance policy, consider asking them how you can adjust or replace your policy instead.
Adjust your policy rather than cancelling it
If your budget changes or you need to review your premium, you may have the option to keep your policy and adjust it to meet your needs. Rather than getting rid of it all together, talk to your financial professional to address your needs and make your policy fit your changing situation.
Flexibility is one of the benefits of a fixed indexed universal life (FIUL) product like the ones we offer at F&G.
Discuss with your financial professional why you originally bought your life insurance policy and how your situation has changed. Consider these questions:
- Do you need less insurance than you did at first?
- Do you need more?
- How is your current health?
- Do you need a reduced premium with the same death benefit?
- Do you need to replace the current policy for a paid-up policy and a lower death benefit that would meet your new needs?
Would taking a loan help with a temporary situation? Keep in mind that a loan can impact the death benefit.
Related: “What you should know about borrowing from your life insurance policy”
There are a lot of factors that can go into adjustments you may need on your policy, and all of them are valid considerations. A financial professional can help you answer these questions about your specific situation and help you review all of your options. Also, keep in mind that there could be tax implications if you were to cash out an existing policy.
Information provided regarding tax or estate planning should not be considered tax or legal advice. Consult your own tax professional or attorney regarding your unique situation.
Term life insurance, entry-level coverage that lasts for a fixed number of years or until you reach a certain age, isn’t as likely to be adjustable. But it’s affordable enough, and you wouldn’t save much money by dropping it. However, you may be able to find a more permanent solution that is within your budget. Your financial professional can review various options that are available to you at the same cost, a little bit more or even at a lower cost.
Whatever product you have, you don’t know how long you’ll be healthy. And staying in your plan can serve you best in the long run. As you get older, the cost to buy life insurance usually goes up. Aging — and the slow decline in your health that typically comes along with it — makes it more expensive for a company to provide insurance.
Your cost of coverage will likely be higher when you go to add it back, and it’s possible you may no longer qualify for high-quality affordable life insurance.
Life insurance can help during unexpected times
Your life insurance policy can have benefits even while you’re still living. In an FIUL, it is possible to take a loan against the cash value accumulated in your policy. This could help in unexpected life events that cause you to reprioritize your finances. It’s important to understand that the cash value helps support the death benefit, so always work with your financial professional to determine the appropriate loan amount for your situation.
Work with your financial professional to see if there are options on your life insurance policy that fit your needs. You may not need to cancel your policy to reduce your costs. An FIUL gives you the flexibility needed to potentially make changes that help your policy work for you now and in the future.
And if you have term coverage, think carefully about where else you can find savings in your budget to keep your policy active – or discuss with your financial professional how you may be able to replace the policy with a more permanent, flexible and cost-effective solution. It could save you a lot of money in the long run.
Want to dig deeper into FIULs and their benefits? Check out “What is an FIUL?”