I can no longer afford the premium. What are my options?

How it works

if one is missing the answer is no

Four things required before anything else

1. 01Durable surplus cash flow, in an ordinary year
2. 02A horizon measured in decades rather than years
3. 03A place in the household's wider position
4. 04A clear purpose for the contract itself

Four of the five keep coverage and one does not. Stopping the optional deposit leaves the contract intact but smaller. Reducing coverage cuts the payment in proportion. The two non forfeiture elections, reduced paid up and extended term spend the accumulated value on coverage, and nothing further is owed.

Each election works the same way procedurally: the owner notifies the insurer in writing, or through the Financial Security Advisor, which route is chosen, and the insurer's administration department recalculates the contract's values and confirms the new terms in writing before anything takes effect. Reduced paid up and extended term both draw on the cash value already accumulated to purchase the replacement coverage, which is why a contract with little cash value built up has less room to work with on either of those two elections than an older, better funded contract does. What each election actually produces in dollars and in coverage is specific to that contract and that insurer, never a general percentage that applies the same way everywhere.

The cost or the catch

the cycle a contract is used through

Funding, drawing and repaying

1. Premium funds the contract on the agreed schedule
2. Value accumulates under the terms of the contract
3. The insurer advances against the cash value
4. Interest accrues to the insurer while a balance stands
5. Repayment restores the capacity that was used

The prices are unequal and the order matters. Surrender is the only route that can create a tax bill when money is short, because anything above the adjusted cost basis is income. The other four cost coverage rather than cash. Getting the five figures from the insurer costs nothing and takes days.

The worst outcome of all is doing nothing. A premium left unpaid past the grace period set out in the contract, without any of the five elections having been chosen, ends in a lapse that forfeits the coverage without even the benefit of converting the accumulated value into reduced paid up or extended term coverage first. That grace period is short, typically a matter of weeks rather than months, so a household that is going to act should not wait for the insurer's notice to arrive before starting the conversation.

What to ask, and of whom

The specific dollar and coverage figures for all five routes on a particular contract belong to the insurer, and requesting a written comparison showing each option side by side, rather than choosing one option in a single conversation, is what turns an anxious decision into an informed one. The provincial Insurance Act under which the contract was issued generally requires that non-forfeiture options exist on a contract of this kind once it has built sufficient value, but the exact terms of reduced paid up and extended term as they apply to a specific contract are set out in the contract's own wording rather than in the statute itself.

Where the shortfall looks temporary rather than lasting, the question of whether an advance against the contract's own value could bridge a short gap, rather than changing the base coverage permanently, is worth putting to the Financial Security Advisor before any of the five elections is chosen, since an advance leaves the coverage itself untouched while the household's circumstances recover.

Who this matters to, and what it leaves out

four settled, then one question

What comes before any product

1. 01Accessible cash for something unexpected
2. 02High interest debt repaid before anything accumulates
3. 03Protection verified by a needs analysis, not an assumption
4. 04Capital, which has to exist before it can do anything
5. 05Then where it is held, and how many jobs each dollar does

This question matters most to a household whose income has genuinely and durably dropped, where continuing the original premium is no longer realistic for the foreseeable future. It matters less to a household facing a short, clearly temporary shortfall, since that household's more useful first conversation may be about bridging the gap rather than about permanently reducing what the contract provides.

What this page does not tell the reader is which of the five routes is the right one for a specific household, since that depends on how long the shortfall is expected to last, what the coverage is actually protecting against, and what each option would cost in that household's own contract, a judgment the Financial Security Advisor works through directly. Where surrender is among the options being weighed, the further question of what tax would actually be owed belongs with the household's own accountant, using the adjusted cost basis the insurer provides. The Financial Security Advisor involved in weighing these five routes is compensated by commission from the insurer, though none of the four routes that preserve coverage generates a new commission on its own.

Step by step, from the phone call to the new terms

The sequence starts with a phone call or a written note from the owner to the insurer or the Financial Security Advisor, stating that the current premium is no longer manageable, ideally sent before a payment is actually missed rather than after. The insurer's administration department then pulls the contract's current values and prepares, on request, a comparison showing what each of the five routes would produce in dollars and in coverage as of that date. The owner reviews that comparison, asks any follow up questions of the advisor or the insurer directly, and then submits a written election of whichever route is chosen, on the insurer's own form.

Once the election is received, the insurer's system processes it, which for reduced paid up or extended term means converting the accumulated value into the new benefit under that product's own non forfeiture table, and for a reduction in coverage or a stopped optional deposit means simply recalculating the ongoing premium. The insurer then sends written confirmation of the new terms, and coverage continues under those terms from that point forward. Where surrender is chosen instead, the insurer processes a final payment and closes the contract, and a tax slip follows the next year if any portion of the proceeds was included in income.

Where the household is choosing between reduced paid up and extended term specifically, the insurer's comparison should show not only the immediate figures but also what happens if the life insured is still living once an extended term period expires, since extended term coverage simply ends at that point with nothing left behind, while reduced paid up continues for as long as the life insured lives, at a smaller amount. A household leaning toward extended term because the resulting coverage amount looks larger on paper should weigh that larger figure against the fact that it is temporary, against a reduced paid up figure that, while smaller, does not carry an expiry date at all. Asking the insurer to show both options running to the same future date, rather than each to its own natural endpoint, makes that trade easier to see clearly. A household that has already missed one payment and received a lapse notice from the insurer still generally has a short window, set out in the notice itself, to make one of the five elections before the lapse actually takes effect, and that window is not the same as the original grace period, so reading the notice carefully rather than assuming coverage has already ended is worth the few minutes it takes. Where the notice's own deadline has already passed and the contract has genuinely lapsed, reinstatement is a separate process entirely, usually requiring new evidence of insurability, and it is not one of the five routes described on this page.