When should you stop paying for life insurance?

Q: My mother is 97 years old, in excellent health and living independently in her own home. For a very lengthy period of time, she’s paid for a whole life insurance policy. The premium is $121, paid semi-annually. Does she really need to continue to pay premiums on this policy or can she cease paying and just leave the policy alone?

—Chris R., Waterloo, Ont.

A: She is 97? Fantastic! What is her secret? I want to meet her. And I want to be her. Wait. Sorry. You asked me the question. I’m afraid my answer requires you to follow up with your broker to understand some math.

Lorne Marr of LSM Insurance says you’ll need to call and find out, “if the annual dividend exceeds the annual premium and if so have them apply it to the premium.” The dividend fluctuates based on interest rates and the profitability of the insurance company. Marr goes on to say that, “if the annual dividend is not sufficient, she might be able to take the difference from the accumulated paid-up additions.” Paid-up additions result when the dividends left in the policy are not paid out in cash or in premium reductions, for example. While you’re on the phone, I would ask them what the payout will be on her passing. If there isn’t an accumulation of paid-up additions, it may well make good financial sense to continue to pay the premiums to make 100% sure that money eventually comes to her beneficiaries.

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