Don't drop your life insurance

Switch from perm to term

Instead of going without insurance, Hutchison says cash value policyholders can trade a permanent policy for a cheaper term one.

"If you have a permanent policy, you can always surrender it for cash value," says Hutchison.

Hutchison warns that surrendering a policy means that policyholders can only pull the current cash value of the account minus any loans or outstanding premiums. Money pulled out of a permanent policy can also have tax consequences. While most of the money you pull out will simply be premiums you paid into the policy, any funds above that amount -- for example, if your policy has performed particularly well -- will be taxable income.