You have your life all figured out.
Rewarding and fulfilling job, kids doing well in school and a loving wife.
Your insurance plan is impeccable, covering you sufficiently for all contingencies that life can spring upon you.
You feel empowered, having cracked life’s Da Vinci code.
Except that your job may not that secured.
With the economy floundering, it is plausible that you may lose your position at work.
Even if you are self-employed, your business may be adversely affected.
In short, unless you are a top civil servant or a multimillionaire, the risk of losing your income source is very real.
When nightmare happens
After you lost your job, you start formulating a plan for a new job or income opportunity.
It is largely futile though
The digits in the bank account are disappearing fast and you are down to your last hundreds.
Your family is struggling to keep ends meet.
Sad is an understated description of your situation.
Hey, look !! You still have your life insurance policies with all those cash values.
They are just sitting there and worse, draining your savings on a monthly basis.
If you cannot feed the family, what is the use of these policies?
“You are not in such a bad shape yet.” You argue with yourself.
Thanks to your prudent lifestyle, you can hold on for another year.
However, you still cannot stop this nagging feeling at the back of your mind
“What if this recession lasts longer than my savings?”
Thankfully, we are here to help.
Let’s try to maintain your policies while reducing your financial burden.
1. Take a premium holiday
For policies with accumulated cash values, it is possible to take a break from paying the premium.
Your insurer will take a loan out of your accumulated cash value to pay for your policy obligations.
For more intricate details about this, this post is the place to go.
2. Sell your units
For ILP (Investment-linked product), you may sell off your units to free up some cash to pay the bills.
You may also take a premium holiday on your ILP and your insurer will sell off some of your units to offset the premium.
One tip is to sell the units quickly.
Before the recession erodes their value over time.
It is also possible to adjust the Sum Assured of your ILP downwards
You may reduce your premium that way,
With the recession ongoing, the decreased coverage may still be enough as the cost of living ought to be lowered too.
3. Review your financials
When you are fighting for survival, you may need to jettison the luxuries and keep only the necessary.
The same goes for your insurance coverage.
Endowment plans provide little coverage – you may wish to surrender them.
That extra ILP that is purported for retirement? That must go too.
When you are fighting for daily survival, you have to forgo the long term saving plan.
Thus, this needs to be done.
Of course, you must be giving up other non-insurance luxuries such as cars, branded goods, etc.
4. Convert to Paid-Up Policy
By using the cash value to convert to a paid-up policy, you may maintain the policy in force while not paying any more for it.
The benefits of the policy will be diminished due to that, be it the coverage amount and/or the period of cover.
5. Look for cheaper alternatives
If you are still healthy and without any pre-existing diseases, you may try to reduce your insurance obligations by buying a term plan to replace that Whole Life policy.
All you need is to make sure that your term plan is approved before you surrender your whole life policy.
In additional, please duplicate all the necessary coverage, such as critical illness, waiver of benefit rider in the replacement term plan.
Term plan is much cheaper than Whole Life.
Reducing your premium and getting some money from your policy termination should buy you some time to turn around your life.
You may note that some sacrifices must be made.
It is inevitable – when money is scarce, you got to make a choice.
In normal circumstances, surrendering of your insurance policies is a no-no.
However, extreme times call for drastic measures.
After maintaining some coverage for your family and reducing your premium, you can re-focus on what you need to do.
Getting yourself trained for new job, finding employment and discovering alternative money sources are some items that require your fullest attention.
When times become better, you may plan another comprehensive financial future for your family and loved ones again.
www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.