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Reasons why you shouldn't cancel your life insurance policy

By Compuquotes Team on October 15th, 2009

In a tough economic climate, it may be tempting to cut various expenses that may seem extraneous or based on luxury. Your life insurance policy shouldn't be one of them. Life insurance may seem insignificant now, but it can mean a great deal to the ones you love later down the road.

If you have life insurance, cancelling the policy may be one of the more expensive mistakes you ever make. It can be tempting to do just that if you experience a financial setback, as insurance premiums offer very little in the way of an immediate tangible value. However, be a big-picture thinker. Here are five reasons why you should avoid cancelling your life insurance policy.

1. Life insurance is an investment in your heirs.

Life insurance is designed to provide for your family after your demise. Although it's difficult to conceive of now, the financial burdens when that time comes can be significant. Consider the costs of credit cards, student loans, auto loans, home mortgages, and home equity lines of credit. Now consider them without your annual income.

2. You've most likely already paid policy premiums.

This reason should make the most sense to those "in the now" policy owners. Especially if you've had your life insurance policy for a while, the premiums you've paid would be lost unless you have one of only a few particular policy types. You would have been better off placing that money into a savings account.

3. There is the opportunity to increase the cash value of the policy.

If you own universal or variable life, you already know the income potential of these two investment vehicles. Because these policies are typically channeled through mutual funds, the better they do, the better you do. Of course, this balance can always tip the other way.

4. You can skip premium payments with some life insurance types.

Many universal life policies have the option of skipping premium payments for a set period of time. The flexibility is part of the draw. If you find yourself in tough times, you can exercise that right with a simple phone call and form. When you recover, you can pick the payments back up without ever losing coverage.

5. You can adjust your coverage amount and subsequently the premium payment.

This is another feature of the flexible life plans. If your premiums are more than you can handle at the moment, simply adjust your policy to a lower level of coverage--your premiums will drop as a result. You can keep your coverage but you won't have to go through the inconvenience of reapplying for a new policy at a later date.

Again, if you had the wisdom to take out a life insurance policy on yourself, you should be wise enough to know that cancelling may put your family at risk. Keep in mind that you're in control of many of your policy factors, enabling you to weather the storm with your coverage intact.

Other articles: Keep your Life Insurance Current

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