I can no longer afford the premium. What are my options?
Four routes exist and each has a price. Stopping the optional deposit costs the growth it would have bought. Reducing the coverage lowers the payment permanently and usually cannot be undone. Converting to a fully paid smaller contract ends the payments and freezes the coverage at a smaller amount. Surrendering ends everything and can produce a tax bill in that year.
What kind of answer this is
- Claim type: Contract fact
- Claim type: Depends on the policy
- Jurisdiction: Contract dependent
Which routes exist on your contract is written into its own non-forfeiture and rider provisions. Whether any of them suits your circumstances is not a question this page answers.
How it works
Three of the four keep some coverage and one does not. Stopping the optional deposit leaves the contract intact and smaller than planned. Reducing coverage cuts the payment in proportion. Converting uses the accumulated value to buy a paid up contract outright, after which nothing further is owed.
The cost or the catch
The prices are unequal and the order matters. Surrender is the only route that can create a tax bill in a year when money is already short, because anything above the adjusted cost basis is income. The other three cost coverage rather than cash. Getting the four figures from the insurer costs nothing and takes a few days.
Where this answer may not apply
- A contract with little accumulated value may offer only two of the four, because the other two need value to work with.
- Where a waiver of premium rider is in force and a disability claim is admitted, none of this is the first question to ask.
- A contract with an amount outstanding against it has that amount settled first, which changes what each route actually yields.
- Corporate ownership changes the tax consequence of every route here, and that is work for a CPA.
What to verify in your own contract
- Which of the four routes your contract offers, from the insurer in writing rather than from a projection.
- The reduced payment each route would leave, in dollars.
- The coverage each route would leave in force, in dollars.
- The taxable amount a surrender would produce this year, from your accountant.
- Whether any route can be reversed later, and what evidence of insurability that would require.
Continue to the full explanation
Review the options before changing the policy.
Sources
- The non-forfeiture and rider provisions of the policy contract, insurer specific, verified 2026-08-30
- Income Tax Act, Justice Laws Canada, verified 2026-08-30
Accountability and disclosure
- Written by
- José Salloum
- Professional capacity
- Financial security advisor, Canadian Wealth Creation Centre Inc., operating as IBC Financial
- Reviewed by
- Insurance and contract education tier, reviewed under a licensed insurance professional's own authority
- Jurisdiction
- Contract dependent
- Last reviewed
- 2026-08-30
- Version
- 1.0
- Compensation disclosure
- Canadian Wealth Creation Centre Inc., operating as IBC Financial, may receive insurer paid compensation if a policy is purchased. It takes the form of first year compensation followed by renewal compensation, and the amount varies by insurer, product, age, premium, contract design, riders and the arrangement with the managing general agency. No single figure would describe every contract honestly, and none is published here.
- Report a correction
- Info@ibcfinancial.com. Write without a policy number, medical information or account details.
Last reviewed 2026-08-30. By Jose Salloum, Financial Security Advisor.