4 Smart Moves If You Cannot Afford Policy Premiums

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Life insurance costs more the older you are when you buy it, and a few products keep repricing you upward after that. Most people don’t notice, because term coverage usually ends before premiums climb the most. But for those using Veterans’ Group Life Insurance, you’re less protected, because the policy reprices every five years. The maximum $500,000 of coverage runs roughly $690 a month at age 65, even after the VA cut rates in 2025.

The difficulties aren’t unique to Veterans Affairs coverage either. Whole life and universal life policies have similar issues. If you can’t afford to keep paying your policy, letting it lapse might sound like it makes sense, but it’s usually the costliest option. With term coverage, a lapse ends the policy and you get nothing back for years of premiums. With permanent coverage you’ll usually land in a nonforfeiture option rather than with nothing, but it’ll be whichever one your contract picks by default, not the one you’d have chosen. Either way, you run the risk of having additional health problems if you try to reapply in the future, making a robust policy unattainable.

The four options below are preferable, enabling you to prolong or extend your policy without giving up the benefit.

1. Ask for a Reduced Face Amount or Paid-Up Policy

Your coverage doesn’t necessarily have to be a binary thing if your premium is the issue. Rather than giving up the coverage itself, often your best option is to ask for a lower rate. If you consider things in the long run, shrinking the policy now is almost always more cost-effective than surrendering it and trying to qualify for a new policy in an uncertain future.

With VGLI you can decrease your coverage at any time in $10,000 increments, and your premium drops with it. So you can trim your policy while making sure you still have coverage. With whole life insurance, that’s the reduced paid-up option, which is when you stop paying and your cash value buys a smaller death benefit that stays in play for life with no further premiums. For universal life insurance, you can ask your carrier to lower your specified death benefit, and the reduced cost of insurance can help you stretch out your policy for years.

2. Use Your Grace Period and Extended Term Options

Missing a payment doesn’t mean your policy is instantly invalidated. If you check the fine print, you’ll be able to figure out what kind of grace periods are at your disposal. For example, with VGLI there’s a grace period of 60 days after the first missed payment before coverage is suspended, and then up to five years to apply for reinstatement. One thing VGLI won’t do is waive your premiums for disability. 

VA’s waiver of premiums applies to S-DVI policies, not the group programs, and the waiver rider doesn’t carry over when SGLI converts to VGLI. If you were totally disabled when you separated, the SGLI Disability Extension is the thing to look at instead.If your policy does lapse, it doesn’t necessarily disappear straight away. A lot of permanent policies will automatically switch over to what’s called extended term insurance. This means your built-up cash value gets used to buy you term coverage at the full death benefit, and it’ll run for a set number of years without you having to pay any more premiums. This tends to be the better option if you don’t think you’ll outlive that term. If you do expect to outlive it, the reduced paid-up option covered earlier is probably the smarter choice.

3. Tap Your Policy’s Value or Get an Accelerated Benefit

The money that’s already built up in your existing life insurance policy can carry the premium, or even help you solve your cash problem outright. Policy loans and partial withdrawals on permanent coverage give you liquidity without terminating the contract.

The accelerated benefit is another route worth knowing about. If a doctor certifies that you’re terminally ill, VGLI will let you claim up to half of your policy’s face value in $5,000 increments while you’re still alive. Whatever you don’t claim still goes to your beneficiaries, and your premium drops to match the smaller amount of coverage left.

A lot of commercial policies carry a similar terminal illness rider too, so it’s always worth checking your own paperwork before assuming you don’t have one.

4. Consider a Life Settlement Instead of Letting It Lapse

For a privately owned policy you no longer need, the secondary market often pays more than you’ll get from surrendering your policy. But if you have VA group coverage, bear in mind that these can’t be sold. A commercial policy converted from SGLI or VGLI is considered privately owned and may qualify for sale on the secondary market.

If you’re weighing this route, here are life settlement transactions explained in full, covering the steps, timelines, and who typically qualifies.

Take your time with the decision, because selling a policy is permanent and you won’t be able to buy that coverage back later. It’s also worth understanding how veterans’ life insurance benefits differ from civilian policies before you make a final call.

Know Your Options Before the Bill Arrives

An unaffordable premium isn’t the end of your coverage. Reducing the face amount, using a grace period, borrowing against built-up value, or selling a qualifying policy all leave you better off than a lapse. Contact your insurer or OSGLI before you miss a payment, and ask a Veterans Service Officer for free help.

If you’re interested in learning more about similar topics, see our other blog pages for more.