My divorce settlement requires that i continue to pay on a life insurance policy to pay for my alimony and child support. Now that i am 3.5 yrs away from paying my obligations under the i would like to let the policy lapse as its getting to expensive to maintain as its a variable policy and if the market doesnt perform well, then the premiums get adjusted to make up for the difference between the market performance and the cost of insurance. What is the worst that can happen if i let the policy lapse? Not even sure if my ex will even find out that the policy lapsed. I dont see any risk. Do you?

The worst that can happen is that you are forced to reinstate the policy. Are you required to provide an in-force ledger to your ex?

Agreed, let sleeping dogs lay. If they dont find out about the lapse, then no harm.

I think the risk is that you cant afford to get the policy reinstated and the court forces you to provide other assurances to your ex-spouse, which could cost you more than the life insurance premiums (even if they are variably adjusted). Why dont you see if you can replace your policy with a different policy? Talk to your insurance agent.

I think every one must be careful while canceling life insurance plans and one must understand the ramifications, including any possible penalties that you might incur. With a cash value policy, you should check with your financial advisor before you cancel.

My parents bought a life insurance policy for me when i want young and now it has cash value of about $9,000. If i cash out the policy so that i can get the cash value will i be taxed on the $9000? How does that work?