Adjusting Your Permanent Coverage: Options for Policyholders with Changing Needs
While Whole Life insurance is known for its guarantees and fixed structure, policyholders often have options to adjust their coverage or payment strategy to meet changing financial circumstances. Understanding these flexibility options is key to maintaining a permanent policy that aligns with your evolving life goals.
Utilizing Policy Dividends for Flexibility
For participating Whole Life policies, dividends can be a great source of flexibility. You can choose to:
- Reduce Premiums: Use the dividends to offset or completely cover the annual premium payment.
- Buy Paid-Up Additions (PUAs): Reinvest dividends to automatically increase the death benefit and cash value.
- Cash Out: Take the dividend payments in cash, providing an annual, non-guaranteed source of tax-free funds.
Alternative Non-Forfeiture Options
If you face financial hardship and can no longer pay premiums, you have **non-forfeiture options** that allow you to maintain some value without surrendering the policy:
- Reduced Paid-Up Insurance: Use the existing cash value to purchase a smaller death benefit that requires no further premium payments. The coverage is permanent.
- Extended Term Insurance: Use the cash value to purchase a term policy with the same death benefit amount, which lasts for a specific, limited time period.
These options prevent the policy from being a total loss and allow you to salvage the investment you’ve made.
Disclaimer: This content is for informational purposes only and is not financial or legal advice. Options and availability of riders and non-forfeiture options vary significantly by insurance provider and specific policy type.