The pandemic upended many aspects of our lives, and one of the areas it’s had an impact on for many is with our finances. If you’re having trouble paying your homeowners, auto, health or life insurance premiums due to COVID-19, then there are some things you can do to ease the burden.
Many insurance companies are offering relief options to policyholders affected by the pandemic. This may include grace periods, flexible payment plans, paused policy cancellations, and extended grace periods. Some state insurance departments are even encouraging or ordering companies to temporarily do one or more of these things.
If you’re struggling to pay your homeowners’ insurance premium, you should contact your insurer to see what relief options are available. And, if you have a life insurance policy, it’s important to know that there’s a standard nonforfeiture law in place that protects policyholders. This law allows you to reduce your coverage and your premiums if you can’t afford to pay the full amount. Let’s review some of the options available if you can’t pay for different types of insurance due to coronavirus.
If You Can’t Pay for Life Insurance
One of the benefits of life insurance is that you can drop your coverage without immediate issue. This is because it is not mandatory for regulation or loan contracts reasons. However, options may differ depending on whether you have term insurance or permanent insurance.
Term Insurance: You can cancel your term life insurance policy at any time without penalty. However, if you have a loan or credit card debt that is secured by your life insurance policy, you will need to maintain your coverage until the debt is paid off.
Permanent Insurance: If you have permanent life insurance, such as whole life insurance or universal life insurance, and you cancel your policy, you may incur what’s called a “surrender charge.” This fee is typically a percentage of the total premiums paid. For example, if you’ve paid $24,000 in premiums over 20 years and your surrender charge is 15%, then you would owe a $3600 penalty if you cancel the policy today.
Options for Health Insurance
There are several options available if you need to make adjustments due to coronavirus. These include: using dividends, switching to a term life policy by cashing out your permanent policy and reducing your death benefit.
Dividends: If you have a whole life policy, you may be able to use dividends to lower your premiums. Dividends are typically paid out in cash, but some companies are offering the option to use them to reduce premiums or increase the death benefit.
Switching: You can also switch from a permanent life insurance policy to a term life insurance policy. This may be a good option if you need to lower your premiums but still want coverage.
Reducing Your Death Benefit: Another option is to reduce your death benefit. This will lower your premium, but it will also mean that your beneficiaries will receive less money if you die.
What is standard nonforfeiture law for life insurance?
The standard nonforfeiture law for life insurance is a law that protects policyholders if they can’t afford to pay their premiums. This law allows you to reduce your coverage and premiums if you can’t afford to pay the full amount.
What is provident fund life insurance tax relief?
Provident fund life insurance tax relief is tax relief that is available to policyholders who have a life insurance policy with a provident fund. This tax relief allows you to reduce your premiums if you can’t afford to pay the full amount.
What to Do if You Can’t Pay for Homeowners Insurance
Home insurers have had to adjust to the circumstances due to the coronavirus as well. Many homeowners are struggling to make ends meet to pay their mortgage, let alone their homeowners insurance.
If you can’t afford your homeowners insurance, the first thing you should do is contact your company representative or agent. They may be able to help you find a payment plan that works for you or offer other options, such as a grace period.
Some companies are even offering discounts to customers who have been affected by the pandemic.
Requirements
Although homeowners insurance isn’t required by law, your mortgage lender may require it for your loan. Therefore, if you can’t afford your homeowners insurance and you’re behind on mortgage payments, you may be at risk of foreclosure.
What About Health Insurance?
Some states have enacted legislation that requires insurers to provide grace periods for health insurance premiums, and banned insurers from canceling coverage if there is no payment. Additionally, some states have banned the collection of any reinstatement or late fees. However, it is not mandated for all states, so it varies from state to state, so make sure you double check.
If you’re having trouble paying your health insurance premium, you should contact your insurer to see what relief options are available.
Cashless Health Insurance Plans
Another option during this complicated period is to opt for a cashless health insurance policy. This type of policy allows you to get the treatment you need without having to pay anything out of pocket.
A cashless health insurance policy can be beneficial if you’re struggling to pay your regular health insurance premiums. However, it’s important to remember that this type of policy typically has a lower coverage limit than a regular health insurance policy.
Homeowners Insurance Lapsed Coverage
If your coverage for your homeowners’ insurance has lapsed, you may be required to pay a higher premium when you are reinstated. In some cases, homeowners insurance companies will allow you to reinstate your policy without paying the higher rate if you can prove that the lapse in coverage was due to financial hardship.
Auto Insurance Options
When it comes to auto insurance, most states require that you have it. If you can’t afford your auto insurance, the best thing to do is contact your insurer and see what options are available. Some states have put a moratorium on policy cancellations for nonpayment.
Not Using Your Car?
If you’re not using your car, then it might be possible to sign an affidavit of non-use of the vehicle to cancel your auto insurance policy. However, you should check with your state’s DMV to see if this is an option in your state.
Final Thoughts
While the coronavirus has thrown many things into turmoil, there are options available if you can’t pay for insurance. From payment plans to grace periods, there is help out there if you need it. If you’re struggling to pay your premiums, the best thing to do is contact your insurer and see what options are available.
Featured Image: Megapixl
