Should I keep paying into life insurance?
[social_share]Life insurance is a way of insuring that dependents will not be left destitute if a person dies. But it may be the case that circumstances have changed and that the life insurance is not seen to be needed as much as it was before. The question then becomes should the life insurance keep on being paid?
There are many reasons why life insurance may not seem as suitable as when it was taken out. There may have been a divorce or estrangement, children may have grown up or money may not be as plentiful as it was when the life insurance was taken out. It is a natural reaction to simply give up payments, but this is not always a good idea.
If payments are no longer made on a valid and paid up life insurance policy then the life insurance policy is usually void. This means that there will be no payout and the money that has been paid in premiums up to that point is lost. There are a number of alternatives to this.
One alternative is trading in life insurance to other buyers. It may sound odd that other people want to buy life insurance for a person that they have never met, but in many cases this is purely a speculative investment. As a number of premiums have been paid in then after a certain point it is statistically more likely to have a payout. If there is a pool of people with late term life insurance then there will take out a large part of the chance and so be a return on the investment.
This means that there are investors who are willing to buy life insurance policies off the current policy holder and will continue paying in the premiums. This is often called “cashing in a policy”. However this means that the payouts will go to these investors. It is not available to all policy holders.
Another thing that can be done is to set up alternative beneficiaries on the life insurance program. This may be a new spouse, or grown up children. An alternative may be to give the current beneficiary the chance to keep up the payments on the life insurance policy. This will mean that there will be no money lost by the policy holder as the life insurance premiums are no longer being paid by the policy holder.
