If you've lost your job, had your hours cut, or had some other unexpected expense that leaves you needing cash, you may be looking at where you can cut expenses. While the chances of needing your life insurance policy may seem remote, you should think carefully before you drop it.
Life Insurance Is Inexpensive
The first step when you're looking to cut costs is to go through your budget and see where you can save the most money. Life insurance is going to be pretty low on this list. While premiums vary widely based on how old you are and what type of coverage you have, the monthly payment will rarely make even a small dent if you're having financial difficulty. This gives you a small benefit to weigh against the potential costs.
Remember Why You Bought Life Insurance
You should also think about why you bought life insurance and what you'd lose if you dropped your coverage. Most people buy their life insurance policies to protect their families. You may be relying on your life insurance policy to replace 20 to 30 years' worth of income if you're a younger worker. If you have a stress-induced heart attack or even just a random accident, your family would be left without that protection.
Consider The Cost Of Getting New Coverage
If you do cancel your coverage, think about what it would take to get new coverage. If you're older and possibly in worse health than when you bought your original policy, you may have to pay much more or even have trouble getting coverage when you go to buy a new policy.
A Whole Life Policy May Offer A Partial Cash Out
If you have a whole life policy, you may be able to cash part of it out. This gives you the best of both worlds. You can use part of the accumulated cash value to pay for your emergency expenses, but you'd still have life insurance in place to protect your family if the unthinkable happened. Be sure to carefully review your policy to see how your coverage might change if you cash out part of your policy.