Alternatives to Lapsing or Surrendering Life Insurance

July 20, 2023 | By Adam Lippman

Alternatives to Lapsing or Surrendering Life Insurance

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As you age, your life insurance needs may change from what they used to be. Whether you have different coverage needs, a tighter budget, or increasing premiums, or decide you could do without life insurance now, you have better options than lapsing or surrendering your policy. Many policy owners are unaware of their options regarding life insurance, resulting in smaller payouts and keeping policies that are no longer beneficial.

Before you let your policy lapse or surrender it for cash value, discover and understand the alternatives to get the most value for your life insurance policy.

Reasons You May Lapse or Surrender Life Insurance

You may lapse or surrender your life insurance policy for numerous reasons. While every situation is different, here are a few common reasons life insurance policies get surrendered:

  • Inability to afford the premiums:¬†One of the most common reasons policy owners lapse or surrender their life insurance is no longer having the ability to make the premium payments. Many older adults live on a fixed income or rely on their retirement savings, making it more difficult to afford monthly premiums. If this is the case, you may think you have no alternative to surrendering your life insurance.
  • Want cash for other uses:¬†If you struggle to afford your life insurance premiums, you may need extra cash for other uses. For example, you may use your surrender payout for mortgage or car payments. You may also want the extra cash for recreational use, like traveling.
  • Different insurance needs:¬†Another common reason people surrender or lapse their life insurance policies is because of changing insurance needs. Whether your policy no longer serves your needs as originally intended or your dependents grew up and got their own policies, you may not need your current policy like you used to. Rather than continue paying for a policy you do not need, you may consider surrendering it for cash.

Find Out What Your Policy is Worth

How to Avoid Surrendering Your Life Insurance

Before deciding to surrender or lapse your life insurance policy, you should understand and consider the alternatives. Here are a few ways to make the most of your life insurance policy without lapsing or surrendering it:

  • Convert term life insurance policies to permanent life policies:¬†Term life insurance generally has more affordable premiums for more death benefit because the policy ends after a certain amount of time. Converting it to a permanent life policy ensures you have life insurance coverage for your entire life rather than just for the policy’s term. While the premiums for permanent life policies are more expensive, you also grow a cash value you can use for a large purchase.
  • Use a loan to maintain your current policy:¬†You may use a personal loan to continue making payments on your current life insurance policy. You can use the funds from the loan to pay off your premiums. This route is most beneficial if your loan payment is lower than your life insurance premium.
  • Reduce your death benefit:¬†Reducing your death benefit can help make your monthly premiums more affordable. Since your monthly payments depend on how high your death benefit is, lowering one can lower the other. Consider how much your beneficiaries would need from the death benefit to ensure they’re cared for financially.
  • Sell your policy through a Life Settlement:¬†If you’re considering surrendering your policy because you need the cash, a Life Settlement is your best chance at getting the most value out of your policy. Life Settlement payouts typically offer significantly more than surrendering your policy.

Life Settlements as an Alternative to Lapsing Your Life Insurance

Despite hundreds of thousands of life insurance policies being surrendered yearly, it is typically not the most beneficial option. Life Settlements are one of the best alternatives to surrendering your life insurance because of the significant payout. Consider how Life Settlements are effective alternatives to surrendering your policy.

Life Settlements are one of the best alternatives to surrendering your life insurance because of the significant payout.


What Are Life Settlements?

Life Settlements involve¬†selling your life insurance policy¬†to a third party. Many policy owners are unaware that their life insurance policies are personal property, meaning they can sell them if the policies are eligible. Life Settlements will pay out a percentage of the policy’s death benefit. The value of your life insurance policy depends on multiple factors, including the policy’s conditions, your age, and health. Life Settlement payouts are generally less than the full death benefit and more than the surrender value.

Another aspect affecting your payout is how much your premiums cost. Your policy buyer will pay your settlement amount and continue making payments on the policy for the rest of your life. In return, they will receive the death benefit payout.

Life Settlements give you more options for your life insurance policy. Whether your current policy is obsolete, your insurance provider offers no other beneficial alternatives, or you simply want more for your policy, Life Settlements are the best way to avoid surrendering your life insurance policy in many cases.

Free Life Insurance Policy Evaluation

How to Avoid Lapsing Your Life Insurance With a Life Settlement

Working with a Life Settlement provider is one of the best ways to get the most value for your policy. Many Life Settlement providers work to match you with potential buyers with big payouts. Finding a buyer on your own can be challenging, and you may not get the full potential for your policy. Professional services help ensure your policy is valued appropriately and sold to the right buyer.

You will also need to determine if your policy can be sold. Some life insurance policies have conditions that prevent you from selling them. You also must meet certain eligibility requirements for a Life Settlement. For example, you must:

  • Be 65 years old or older, or younger with a health condition.
  • Have a qualifying policy worth at least $100,000.
  • Meet additional state requirements like mandatory payment periods.

If you’re eligible for a Life Settlement, sell your policy as soon as you can. The sooner you find a buyer with a high payout, the sooner you will avoid lapsing or needing to surrender your life insurance policy.¬†

Get the Most for Your Policy With Settlement Benefits Association

At Settlement Benefits Association, we are dedicated to getting you the most value for your life insurance policy. We represent you as the seller, working to find you a buyer with the highest payout. If you are considering surrendering your life insurance policy, we can help you determine if now is the right time for a Life Settlement. If you are eligible for a Life Settlement, our team will evaluate your life insurance policy to estimate how much your settlement could be. 

Use our Visual Valuator to determine whether you qualify for a Life Settlement, and contact us to start a free policy evaluation.

Get the Most for Your Policy With Settlement Benefits Association

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