“Premiums” are probably your least favorite part of having a life insurance policy. But they are the key to keeping your policy–and the option to have life insurance at all–alive.
What is a premium?
Despite its fancy-sounding name, a premium is a cost of maintaining your life insurance policy. Think of it as a subscription cost to Netflix. You pay a certain amount each month or year, and in exchange, your insurer provides coverage in the form of a promised death benefit.
This means that, because you’ve paid your premiums, your insurer would pay out a death benefit to your beneficiaries if you were to pass away.
With “whole life” or “IUL” policies, your premiums are less like paying rent and more like putting money into something you own. A portion of what you pay still goes to the insurer, but the rest is able to slowly grow over time by collecting interest. You’re able to use these kinds of policies as collateral, or even sell them as though they were property.
Why are life insurance premiums so expensive?
As you might expect, these “whole life” and “IUL” policies (which are known as kinds of “cash value life insurance”) do tend to have more expensive premiums than typical “term” policies, which don’t offer the savings feature of cash value policies.
Term life insurance provides coverage for a period of time (like 20-30 years) after which, if the insured has outlived the “term,” the insurance company doesn’t need to pay out a death benefit. 95% of term policies are outlived, and therefore, go without being paid out.
Meanwhile, cash value life insurance policies typically provide lifetime coverage, meaning the insurance companies plan to pay out a death benefit on every policy. This is another reason why these kinds of policies will have more expensive premiums.
Fortunately, with both term and whole life life insurance, the premiums are typically “fixed” throughout the duration of the policy. This means that once your policy is in effect, your insurer can’t decide to increase your premiums just because your health declines over time.
If you were to outlive a term policy and then purchase a new term policy, you would be very unlikely to get the same premiums you qualified for in your earlier policy–largely because you were younger and in better health then. As people age and develop health conditions, it becomes increasingly expensive for insurance companies to provide coverage.
Can I stop paying my premiums?
The short answer: yes… with consequences.
Deciding to not pay your premiums anymore isn’t a choice to be made lightly–it’s definitely something to talk through with your agent and/or financial advisor. Canceling your policy means that you’ll lose coverage–including your death benefit. On the other hand, if you have a cash value policy, you may be able to receive the money saved in your policy. But there’s another way.
Introducing the better answer: yes, you can stop paying your premiums–and if you go through Aspen Life Settlements, we’ll take overpaying your premiums so that you can keep your death benefit and coverage. We’re interested in most whole life (and some IUL) policies as a place to grow our money. So not only will we free you from paying future premiums, but we’ll also pay you for your policy.
If you’re looking for a way to get cash on hand and get out of paying premiums, but you also value the coverage that life insurance provides and the promise of a death benefit in your beneficiaries’ future, Aspen Life Settlements checks all of the boxes. Reach out to us today to see how much your policy is worth!