Life Insurance

Whole life insurance is meant to provide life insurance coverage for your entire life. When whole life is initially purchased, it's usually selected over term life because there is a permanent need for life insurance. However, as time goes by, there are many reasons why whole life insurance may no longer be needed, including:

* Death no longer poses a financial threat to loved ones
* Premiums are too expensive
* Other life needs arise, such as elder care

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If you believe you no longer need your whole life insurance policy, the first step is to think about why you no longer want the policy. According to Rick Blaser, marketing director for The Hartford's private wealth management group, you can clarify this by figuring out whether you are saying, "I don't want insurance" or "I don't want to pay the premiums anymore."

What to do if your premiums are the problem

If you don't want to pay premiums anymore, one option is to use the cash value in the contract to purchase reduced paid-up insurance, Blaser says. Paid-up life insurance refers to a policy in which you have enough cash value, or you've already made enough premium payments, to cover the cost of insurance for the rest of your life.

Paid-up insurance can be purchased by either working with the insurance company that issued your original life insurance policy, or working with another life insurer and using a 1035 exchange to get a different policy, he adds. A 1035 exchange is when one life insurance contract is exchanged for another in a way that does not trigger income taxes. One caveat, Blaser notes, is that a new life insurance policy, from a new insurance company, is usually accompanied by new charges such as sales fees.

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