When you purchased your life insurance policy, it was probably a wise investment. Perhaps you had just gotten hitched, bought a new home or welcomed your first child into the family. These are all great reasons to capitalize on the safety, security and peace of mind a life insurance policy can bring. However, as you age, your life circumstances will inevitably change—and so will your insurance coverage needs.
A growing number of seniors are finding that their life insurance policies are no longer serving them, and for some, they’re a flat-out burden. In fact, the Wall Street Journal recently accused certain types of universal life policies of creating financial hardship for policyholders who purchased these products in the 1980s and 1990s. A steady decline in interest rates over the past few decades has compounded the issue, causing some policyholders to become dissatisfied with their policy’s performance.
While some beneficiaries will undoubtedly reap the rewards of the policyholders’ plans, some seniors may wish to get rid of their life insurance altogether. Rather than lapsing your policy or surrendering it back to the insurance carrier, there are other options available to you if you’re seeking to get more from your underperforming life insurance policy.
If you want to keep your policy, you may be able to adjust the terms of your policy or exchange it for a new type altogether. For example, if you are still in good health, you may elect to exchange your current contract for a guaranteed universal life policy where your premiums are guaranteed for life. Making a switch like this can help you budget for your premiums without worrying about whether they’ll suddenly skyrocket or change over time.
Some policyholders decide to revamp their entire life insurance plans by selecting to purchase another policy that better suits their needs. This tactic may work for some, but if you are already struggling to keep up with payments, it may not be wise to invest in another coverage plan.
Pursuing a life settlement is often considered the best of both worlds: By selling your policy on the secondary market, you can free yourself of your life insurance—and your costly premiums—while receiving a lump sum payment for your plan. A life settlement can offer financial stability when you need it most, enabling you to:
- Pad out your retirement savings
- Cover medical costs
- Pay for your residential needs, such as assisted living
- Fund your grandchildren’s college education
- Finance a trip or family vacation
- Cover daily living expenses
In order to qualify for a life settlement, you must be at least 65 years old and own a term, whole or universal life policy with a face value of at least $100,000. For many seniors, a settlement is all it takes to get a new lease on life.