What to do if you cannot afford the premium
Always shop around
When you make all the hard decisions about how much life cover to buy, most people choose to pay easily affordable premiums. You can always add new life insurance coverage as your pay increases over time. But this assumes that employment continues. Sadly, the recession means more people are losing their jobs. Injury and disease can also mean no job and no income. So what should you do if the strain of paying the premium(s) is too much? First, do not panic. There are options available. The bad news is basic term cover ends the moment you stop paying the premium. Once term policies end, claims cannot be made. You should talk to the insurer and take all reasonable means to keep the policies going. If the policies lapse, it will always cost you more to take out new policies later. For all other policies, check the small print.

Some flexible policies offer you the chance to increase or reduce the monthly amount you pay. There are also options to miss a payment without incurring a penalty. But never assume your policy is flexible. If you find the policy hard to understand, ask the insurer for a clear statement of your rights. For example, it may help if you currently pay your premium annually to switch to quarterly or monthly instalments.

With the investment-linked policies, there may be a reduced paid-up option, i.e. there's enough paid as premiums to convert the policy into a fully paid-up term policy. If all else fails, surrender the policy for cash. This avoids you losing everything if you simply default and the policy lapses. Although it's less likely during the recession because investment values have fallen, there's a liability to pay tax if the cash value you receive is more than the premiums you paid.