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A life insurance policy is ultimately designed to provide a death benefit to heirs; it is also one of the most important moves for legacy creation and lifestyle preservation that an insured can make. Unfortunately, there are a few things that can happen over the course of a lifetime that will remove or reduce the intended benefits of a whole life policy.

Decreasing Death Benefit with Unpaid Policy Loans

In a whole or permanent policy, cash values can accrue. These cash values are available for tax-free loans during the life of the policy. But, as with any type of loan, a cash value loan should be paid back. When a loan is not paid back it can reduce the overall death benefit awarded to beneficiaries.

Policy Surrenders: The End of an Era

Sometimes things change and a new approach to estate and legacy planning is needed. When this occurs, a life insurance policyholder may decide to close out his or her active whole or permanent life insurance policies. When these policies are cancelled and they’ve accrued cash values, it’s called a cash surrender. Upon request the insurance company will pay the cash surrender value to the policy owner, which then removes any possibility of death benefit payment.

Removal of Benefit through Policy Lapse

In order to keep your life insurance contract current, you must make timely premium payments. Your premiums can be paid monthly, quarterly, semiannually, or annually. You can make your payment several ways, including by having the premiums automatically drafted from your bank account or by sending in a check or money order.

No matter how you choose to pay your premiums, if you miss a due date the policy will likely lapse. If there is cash value in the policy there may be a temporary applied premium loan pulled from those values but once that is depleted, the policy will be cancelled. You may be able to have the policy reinstated if you go through underwriting again and there are no significant changes in your health, but if your reinstatement is not approved then the lapse means there is no death benefit for your heirs.

Your beneficiaries are relying on you to keep your death benefits intact. If you need to increase your death benefit to make sure that you leave enough behind for everyone you love, give us a call at Heritage Insurance and we'll look at your Regina Life Insurance policy today.

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