What to Do If You Can’t Afford to Pay Your Life Insurance: Part 1

If you own a life insurance policy, you’ve already weighed every option and determined the value it stands to add to your portfolio. You’ve considered the financial strain an unexpected death could put on your family, and defined how much your dependents would need to survive, without your income. While we spend each day educating our clients on the importance of life insurance, we are still conscious of the fact that everyone falls on difficult times. And, when those days arrive, life insurance payments may become one of the first casualties.

Whether it’s the loss of a job or unexpected expenses, everyone falls on tough financial times at least once in their adult life. This is when we have to analyze the family budget and identify ways to cut back on spending. Since none of us have any plans to pass away anytime soon, life insurance is often the first part of the budget families consider slashing. After all, how can you worry about your family’s financial situation ten or twenty years from now, when you can’t even figure out how to get past today?

If you’re having trouble paying the premium and are considering canceling your life insurance policy, make sure you understand all the potential repercussions. Don’t make a hasty decision now that could significantly impact your family later, just to save a money in the short term.

Life After Death

When a family member dies, those left behind are often left with a great number of expenses. In addition to the mortgage and daily living expenses, there are funeral costs, credit card bills, and taxes. In fact, 62% of consumers polled indicated they would be financially strapped almost immediately, if the primary breadwinner passed away unexpectedly. While most companies are sensitive to a family’s loss, they would go out of business if they absolved the outstanding debts of everyone who suffered the loss of a loved one.

Far too many people allow their life insurance policy to lapse, without considering all their options. Most don’t even realize that they have any options at all. Let’s look at a few ways you can keep your current life policy in place, even when you can’t afford to pay your premiums.

Term Life Insurance

A term life policy covers you for a specified period of time. If you pass away during that period, your beneficiaries receive a death benefit. If you’re still here, once the policy period expires, no one receives anything. If you fail to pay the policy premium when it comes due, the policy will lapse and your beneficiaries will receive nothing.

If you own a term policy, there are a few options available to you:

  • Grace period: While you’ll need to check the specifics of your policy, most insurers offer a 30-day grace period. Just send in your payment within the grace period and the policy will continue on as usual.
  • Payment plans: Most insurance companies also offer the option to pay your premium in installments. If you currently receive a bill annually, or even semi-annually, call your insurer and ask what installment options are available to you.
  • Reinstatement of a lapsed policy: If you failed to make your premium payment within the grace period, the policy will lapse. Don’t get discouraged though, there’s still hope. Most companies will allow you to reinstate your policy after the lapse date. The rules very from insurer to insurer, so check with your agent or the company to find out their specific rules. Some allow for reinstatement up to five years, but do require the insured to undergo the underwriting process again.

Permanent Life Insurance

If you opted to invest in a permanent life insurance policy, you likely had a number of reasons for doing so. Unless your situation has changed drastically and it’s probably a good idea for you to keep the policy in place. Fortunately, there are a number of options for you to consider:

Use your cash value to pay premium: This option is best for insureds who have had a permanent policy in place for quite some time. In the initial years, the policy is slow to build up cash value. As time goes on, however, it does build enough cash value to make a significant impact on one’s financial situation. While we recommend holding off on cashing in until you’ve reach the goals you set when purchasing the policy, we also understand that unavoidable circumstances occur. And using the cash value to pay the premiums is certainly better than allowing the policy to lapse. Before selecting this option, be sure to discuss the long-term implications this could have on your policy. Using the cash value of your policy is considered a loan. If you don’t pay it back, the death benefit your beneficiary receives will be reduced and, in some cases, cause the policy to lapse.

Use your dividends to pay premium: If your permanent policy pays dividends on the policy’s investments, you may be able to use these to offset your premiums.

Reduce the death benefit: Many insurers allow customers to decrease the face value of the policy in exchange for a reduced premium. In some cases this diminishes the premium amount enough for the policy to be considered “paid in full.” In this instance, the policyholder is able to stop paying on the policy entirely.

Waiver of premium: Many policies include a waiver of premium rider, which allows the insured to stop paying on their policy if they meet the disability conditions set by the carrier.

Convert to a term life policy: While you would incur some cancellation feeds, converting to a term policy is another option for those carrying a permanent life policy. In this case, you would cancel the permanent policy, using the cash value to convert to term insurance. If you’re considering this option, just keep in mind that your new policy would only provide a death benefit should you pass away during the defined timeframe.

If you’ve found yourself in a financial predicament, remember – nothing in life is permanent. This too shall pass. Work with your insurance advisor and explore all your options before allowing your policy to lapse. Stay tuned for Part 2, where we explore a few more potential alternatives and answer some questions frequently asked by others in your same situation.

I’m All Set to Retire: Do I Really Need That Life Insurance Policy Anymore?

Each of us has a different vision of what retirement will look like. Some plan to travel, while others hope to volunteer in their community or spend more time with family. You’ve spent all these years focusing on building a nest egg for your later years, it’s time to sit back and reap the rewards. For many, this means doing away with their life insurance policies. After all, there’s little to no income to replace should you pass on and your dependents are out of the house, right?

In many instances, this is true. However, what you do with your life insurance policy should be carefully considered before making any rash decisions. Let’s look at a few questions you should ask yourself when considering your options.

Have You Considered Estate Planning?

When a family member dies, those left behind are often left with a great deal of expenses – funeral costs and federal and state estate/inheritance taxes leave some heirs scrambling to sell off assets.

For individuals whose goal is liquidity, a life insurance policy such as an irrevocable life insurance trust can prove beneficial. The policy cannot be modified, revoked, or terminated for as long as you’re alive. Upon your death, proceeds are protected against creditors and estate taxation.

If this is something you’re considering, be sure to seek the guidance of an experienced life insurance agent or financial advisor.

Are You Still in Debt or Working?

Many consumers reach retirement age and are still in debt. Whether it be from failed business ventures, credit cards, or mortgage, this outstanding debt will still need to be paid once you pass away. Retirees who are still facing outstanding debt should consider their life insurance options. A guaranteed level-premium term life policy is a great way to protect your family against a mountain of debt upon your death.

Again, be sure to speak with a licensed professional before making any changes to your current policy, or committing to a new one.

Do You Have a Disabled Child or Other Dependent?

A retiree whose children are out of the home and spouse is self-sufficient might not have a need to continue their life insurance. However, if you have a special needs family member, their care after your death should be a consideration. Additionally, will your spouse lose a significant amount of your pension or other monthly income? If so, a life policy can help fill that gap.

Do You Wish to Leave a Charitable Legacy?

While consumers often choose to make annual donations to a charitable organization, many are now realizing the benefits of leaving a charitable legacy in the form of life insurance. When structured properly, your gift can benefit both you and the recipient, at a lower out-of-pocket cost to you.

Do You Own Your Own Business?

Business owners have a responsibility to more than just their family. They have employees and business partners to consider and, for many, their death could have a significant impact on those left behind. If you’re unfamiliar with key man life insurance, visit our blog for more details regarding this critical business tool.

As you approach the finishing line for your retirement planning, it’s important that you have the full picture regarding where you stand financially. Ask yourself:

  • What sources of income will I/we be reliant on?
  • What are our outstanding debts, including a mortgage?
  • Am I in good health? How is my spouse?
  • Who is dependent upon me and how?

Many view life insurance after retirement counterproductive, until they’ve considered these questions. While it may not be a necessary investment, you owe it to your loved ones to take a moment to examine your situation from every angle. And do not ever cancel an existing insurance policy without speaking with an insurance representative first.

Life Insurance Paramedical Exam: What Are They Testing For?

Last month, we shared with you the details of what to expect during the life insurance application and paramedical exam process. Some of you may be wondering “But what exactly will they be testing for?” So, to add that last piece to the puzzle, we thought we’d provide some specifics regarding what underwriting is looking for.

If you have any health issues that come up on this list, please do not let this intimidate you. Negative results do not guarantee you’ll be denied coverage. However, if you’re feeling uneasy, please take a moment to share your concerns with us. Our job is to arm you with all the information and assist you in finding the very best policy, at the best possible rate.

Heart Conditions

According to the American College of Cardiology, cardiovascular disease (CVD) is responsible for almost 800,000 deaths in the U.S. each year, with one person dying every 40 seconds. Your blood work will offer underwriting insight into the health of your heart and arteries, through the following tests:

Cholesterol

Cholesterol is fatty matter that your body needs to keep everything lubricated. Your blood holds “bad” and “good” cholesterol. If it’s storing too much of the bad, it can cause serious health complications. The specifics regarding how much is too much varies from insurer to insurer.

  • HDL– High-Density Lipoprotein is that “good” cholesterol we mentioned earlier. It wards off LDL build-up in your arteries.
  • LDL – Low-Density Lipoprotein is what’s labeled as “bad” cholesterol. Accumulation of LDL in your arteries typically leading to blockage and, potentially, heart attack or stroke.
  • LDL/HDL Ratio – This ratio is used to define your risk for heart disease. The lower number = lower the risk.
  • Cholesterol/HDL Ratio – This is also an indicator of your risk for heart disease. Ideally, this number should read 5 or lower.

Triglycerides

Triglycerides are fat lipids found in your blood. Higher levels indicate an increased risk for heart disease. Levels of 150 or lower are preferred.

Diuretic In Urine

Your urine sample will be used to test for diuretics, which is an indicator that you’re currently on blood pressure medication.

Beta Adrenergic Blockers

Some insurance companies will test for beta adrenergic blockers, which shows if you’re on any blood pressure medication or being treated for heart defects or arrhythmias.

Liver

The liver is one of the primary producers of protein and cholesterol in your body. In fact, contrary to popular belief, only 20% of the cholesterol in your blood stream comes from the foods you consume; the other 80% is produced by your liver. These tests offer the underwriter insight into your risk for liver or muscle disease.

Alkaline Phosphatase

Elevated levels of this enzyme could indicate liver or some types of bone disease. Target readings are 30 to 100.

Aspartate Aminotransferase

(AST) Increased levels of this enzyme in your blood signals the potential for heart, muscle, or liver disease. Target readings are below 40.

Alanine Aminotransferase

(ALT) You may be at risk for liver disease if elevated levels of this enzyme are present. Target readings are 45 or lower.

Gamma Glutamyl Transpeptidase

(GGT) Higher levels of this enzyme are often present with liver disease and excessive alcohol consumption. Target readings are below 65.

Bilirubin

Elevated levels of bilirubin are an indicator of liver or gallbladder disease. Target levels range from .3 to 1.8.

Protein

Another indicator of liver disease; target levels range from 6 to 8.

Albumin

Lower levels are an indicator of severe liver disease and could be a sign that additional disorders exist. Target levels are between 3.8 and 5.2.

Globulin

Readings lower than 2.1 or higher than 3.5 could indicate an issue. Increased levels could be a sign of infection or immune system problems.

Pancreas

The pancreas works to produce hormones and enzymes that are responsible for regulating blood sugar levels and food digestion.

Glucose in Urine

The presence of glucose is an indicator of diabetes.

Hemoglobin A1c

This test provides a measurement of blood glucose over the last 90 days. Target level is 5.7 or lower. If your reading is 5.7 – 6.4, you’ll be considered pre-diabetic by the life insurance underwriter. If your levels are 6.5 or above, underwriting will view you as diabetic.

Fructosamine

This provides a measurement of your blood sugar levels over the past 2-3 weeks. Target levels are between 1.5 and 2.5.

Kidney and Bladder

The kidney and bladder are responsible for removing waste from your urine.

Leukocyte Esterase

This enzyme’s presence enzyme could indicate an infection.

Blood urea nitrogen

(BUN) This reading is used to calculate your overall health. Target levels are 10-25.

Urine PH Screen

This tests for the acidity of your urine. Target levels are 4-8.

Hemoglobin Screen

The presence of hemoglobin could indicate kidney infection or a UTI.

Creatinine

Elevated levels signal the possibility of kidney disease. Target levels are 0.7 to 1.5.

Proteinuria, Urine Creatinine, and/or Microalbumin

Presence of these in your urine indicates you may be at risk for kidney disease. Normal levels of urine creatinine are 25-250. They’ll also test your ratio, which should be between 0.0-0.20. Levels of 0.30 or lower are considered normal for microalbumin.

Serum HIV

Your blood will be tested for HIV, which is the virus that causes

AIDS.

Cotinine

Cotinine is the primary byproduct of nicotine. Presence signals possible tobacco use, ranging anywhere from 2 days to 3 months.

The paramedical exam is the underwriter’s tool for getting a picture of your overall health. This, combined with your application, helps the insurer identify you as a risk and set your premium. Regardless of what you fear these tests could uncover, don’t let this keep you from exploring your life insurance options. Discuss your choices with a licensed life insurance agent; we’re here to help you find the very best solution to fit your family’s needs.

Expectant Mothers – What You Need To Know About Life Insurance

Expecting a child is one of the most exciting times in one’s life. You’re filled with hope for the future, daydreaming about what lies ahead for your family. With that little bundle of joy, however, comes an immense amount of responsibility. This little life will look to you for love and guidance; and every decision you make from this moment forward will be made with your child in mind. It’s only natural that pregnancy is the time many families start to consider their options regarding life insurance.

Life insurance provides your family financial security should you pass away unexpectedly. While this is something no one wants to think about, we owe it to our families to do what we can to secure their future, particularly when a child is on the way.

If you’re already pregnant, you’ve probably written off life insurance for now, assuming you’ll be denied coverage or, at the very least, be charged sky-high premiums. This isn’t always the case. Most insurers will insure a pregnant woman up to their third trimester. In fact, many insurance companies will issue a policy throughout the entire pregnancy, assuming the applicant fits the underwriting guidelines and there are no serious complications with the pregnancy.

When Pregnancy Complications Arise

If you’re pregnant, or considering bringing a child into the world, you’ve probably read about all the complications that could occur. Controlled gestational diabetes is a health-related condition that occurs only during pregnancy. Should you be diagnosed with this, don’t be discouraged. Many insurers will not only accept your application, they’ll issue your policy at Standard or Preferred premium rates (if underwriting hasn’t uncovered any other health concerns).

Conditions that often disqualify applicants include:

  • High blood pressure or preeclampsia
  • Difficulties with a previous pregnancy
  • Previous c-section birth

If you fit into one or more of these categories, discuss your options with your life insurance agent – it might be best for you to wait and apply after your child is born.

Advice for Obtaining the Most Favorable Rates

  • If you and your partner are discussing starting a family, consider applying for life insurance first. This will position you for the most favorable policy and rate.
  • Weight and cholesterol are both considered during the underwriting process. These levels often fluctuate during pregnancy and while breastfeeding. If you’re already expecting, discuss your options with an insurance agent – the sooner the better. But don’t make any rash decisions; take the time to choose the policy that best fits your families growing needs. A few days isn’t going to make a huge difference, but choosing the wrong policy could.
  • If applying pre-pregnancy is no longer an option, apply before you hit your third trimester.
  • Some underwriters factor in postpartum depression issues when reviewing an application. If you’re experiencing postpartum symptoms, discuss this with your agent. They can help you shop around for the best policy at the best rate.

Congratulations, you’re about to embark on the most fulfilling experience of your life. This should be a time of joy and hope. We understand that life insurance can be intimidating, even under normal circumstances. The peace of mind of knowing your family is cared for financially should the unexpected occur will far outweigh any stresses you might endure during the consideration and application stages. The Vista Life team is here to make the process as painless as possible. So you can get back to what matters most – enjoying your new family.