Can’t Keep Up with Life Insurance Premiums? Here’s What Really Happens — and a Smarter Option

If rising premiums are squeezing your budget, you’re not alone. Every week we hear a familiar story: someone bought life insurance years ago for all the right reasons, but today the math doesn’t work — and they’re stuck between keep paying, let it lapse, surrender for a small amount, or sell the policy for cash through a life settlement. This guide explains what actually happens when you stop paying premiums, and why a life settlement can be the smarter move for many seniors.

John’s Dilemma: “Do I Keep Paying?”

John, 72, bought a Universal Life policy when his kids were young. Premiums were manageable then. Now, between medical costs and inflation, the monthly bill stings. He’s not trying to “game” anything — he just wants to make a wise decision: keep paying, let it go, or see if there’s a fair way to exit.

John’s question is the question: What really happens if I stop paying? And if there’s value still locked inside this policy, how do I find it?

Why Premiums Rise Over Time

Life insurance costs are tied to age and risk. With some permanent policies, charges increase as you get older. If market performance or credited interest underperforms expectations, the policy may need more funding to stay on track.

• Policy charges increase with age: The older the insured, the higher the insurance cost.
• Underperforming interest/returns: Lower credited rates can mean higher out-of-pocket premiums.
• Design vs. reality: Policies designed years ago sometimes need adjustments to keep coverage level.

None of this means you did anything wrong. It just means your choices today should be based on where you are now — not where you were when you bought the policy. If you’re evaluating options, it helps to understand the process and who typically qualifies.

What Actually Changes When You Stop Paying

If you stop paying premiums, most policies enter a grace period and then lapse. Some permanent policies will draw from available cash value to cover costs temporarily, or shift into reduced coverage if the contract allows. The end result for many people? Lost coverage and lost value.

Before making a final decision, compare the outcomes below and skim our FAQ for quick answers.

Your Options: Lapse vs. Surrender vs. Life Settlement

Want a quick estimate tailored to your case? Try the Life Settlement Calculator.

How the Life Settlement Market Works (in Plain English)

A life settlement is simply a sale of your policy. Instead of giving it back to the carrier for a small surrender value — or letting it lapse — you find a buyer who believes the policy is worth more. That buyer takes over premium obligations and eventually collects the death benefit.

In practice, your case is shopped to multiple licensed buyers to create competition. You review the offers side-by-side with guidance and decide if the numbers make sense for you. See our How It Works page for a step-by-step overview.

How Buyers Value a Policy — The Big Drivers

Buyers are balancing two things: what it will cost to keep the policy in force (future premiums) and what it will pay eventually (the death benefit). These factors matter most:

• Age & health history: Older age or health changes since issue can increase value.
• Policy type: Universal Life, Whole Life, and Convertible Term are commonly considered.
• Face amount: Policies of $100,000+ are most typical, though larger cases often see more interest.
• Premium requirements: Lower ongoing premiums or flexible funding can improve value.
• Carrier strength & contract features: Clear, stable contracts are easier to price.

If you’re unsure where your policy stands, start with a quick estimate using the calculator, then review the Who Qualifies page.

Maria’s Story: Turning a Burden into Breathing Room

Maria, 74, owned a $250,000 Universal Life policy. Premiums crept up and her budget felt tight. She considered surrendering for a modest cash value. Instead, she explored a life settlement. After her case was shopped and multiple offers came in, she accepted a lump sum that was meaningfully higher than the surrender amount.

That cash didn’t just balance a spreadsheet. It covered medical expenses, cleared a small credit card balance, and funded a few family trips she’d been putting off. Maria didn’t “lose” by selling — she reallocated value she didn’t need in coverage to value she could use in life.

Every case is unique. For a personalized estimate, try the calculator or contact us with questions.

The Emotional Side: Letting Go vs. Doing What’s Right for You

It’s normal to feel attached to a policy — it symbolizes protection and promises you made. But there’s also wisdom in recognizing when your needs have changed. Selling doesn’t mean “giving up”; it can mean choosing the option that supports your life today.

• You may not need the original coverage if your family is financially secure.
• Your goals may have shifted: health costs, retirement, helping grandkids.
• There can be more value in cash now than in a policy you’ll likely lapse anyway.

Who Typically Qualifies

• Age: 65+ (younger may qualify with significant health changes)
• Coverage: $100,000 or more
• Policy Types: Universal Life, Whole Life, or Convertible Term
• Health: A change since issue can increase value

See details on Who Qualifies. If you’re on the fence, the calculator can help you ballpark value in minutes.

Timeline: What the Process Looks Like

1. Policy review: We gather details from your carrier to estimate market value (learn more).
2. Shopping your case: Competing offers are requested from licensed buyers.
3. Offer review: You compare options with guidance — no pressure, no obligation.
4. Closing & payout: On acceptance, funds are disbursed securely and premium payments stop.

Taxes, Fees & Common Myths

Taxes: Portions of settlement proceeds may be taxable depending on your basis and gain. We recommend discussing your situation with a qualified tax advisor. See our FAQ for general guidance.

• Myth: “Only very large policies qualify.”
  Reality: Policies starting around $100,000 can be considered.
• Myth: “It’s just surrendering under another name.”
  Reality: A settlement is a sale to a buyer and can be higher than surrender value.
• Myth: “The process takes forever.”
  Reality: Many cases close in weeks; see the timeline.

When to Take Action (and Where to Start)

If premiums are straining your budget — or if you no longer need the coverage — it’s worth exploring your options before the policy lapses. That way, you can compare surrender vs. settlement and decide based on facts, not pressure.

A good first step is a quick self-check with the Life Settlement Calculator. Then browse How It Works and Who Qualifies, or send us a question through the Contact page. If you want to go deeper on comparing options, read our companion article: Life Settlement vs. Surrender — Which Pays More?

Quick FAQ

Does stopping premiums always mean a lapse?
Not always. Some permanent policies use available cash value to pay charges for a while, or reduce coverage. Check your contract or ask your carrier what happens in your specific case.

Is a life settlement guaranteed to pay more than surrender?
Not guaranteed — but many cases do. It depends on age, health, premiums, policy type, and market demand. Compare both paths before deciding.

How long does the process take?
Many cases close in weeks. Timing varies based on how fast carriers provide info and how quickly you review offers. See How It Works.

What if I’m under 65?
It can still be possible with significant health changes. See Who Qualifies.