Quora Answer: If I Cannot Afford the Life Insurance Policy 5 Years after Purchase, What Happens Next?

The following is my answer to a Quora question: “If I buy life insurance, but cannot afford the premiums 5 years later, what happens?”

This depends on whether you are dealing with a term policy, or non-term.  If it is a term policy, then the answer is straightforward: the policy lapses.

If you have a whole life policy, you have some options.  You may negotiate to freeze payment for a specific period of time, which may be a matter of a few months.  Not all insurers offer this, and not for every such policy.  You may choose to borrow from the policy to pay for the premium, eating into the coverage.  You may reduce your coverage, and readjust the premium.  You may also consider lapsing the riders, but keep the main policy.

If you have an investment-linked policy, the premiums will be deducted from the plan by selling appropriate units in the fund.  This carries on until the value of the policy is zero.