Lapse Life Insurance

Insurance companies frequently employ the tactic of claiming that they did not receive a premium payment and, therefore, have canceled the policy. However, the laws governing lapses due to non-payment of premiums are intricate and constantly evolving. Insurers, such as American General, AARP, and MetLife, have a duty to update their contracts and practices in accordance with these evolving laws. Yet, not all insurance companies are as diligent in this respect as one might hope. In many instances, insurers fail to adjust their policies to meet the new regulations, neglect to notify policyholders about an impending lapse, or even fail to send premium-due notices to the correct address. These mistakes, along with many others, may be uncovered during an appeal process, potentially rendering the insurer liable for the claim. As a result, hiring an experienced lapse attorney can significantly improve the chances of recovering life insurance benefits, as opposed to attempting to resolve the matter alone.

The fact that we all lead busy lives and sometimes overlook important details, including the payment of bills, is a reality. While this may not always have serious consequences for most bills, failing to pay a life insurance premium can lead to dire outcomes. Non-payment of a life insurance premium may not only result in the cancellation of the policy, but it may also go unnoticed by both the policyholder and the beneficiary for an extended period, particularly if the insurer, such as Reliance Standard, Banner, or Transamerica, fails to send a cancellation notice in a timely manner. If you find yourself in the unfortunate situation where the policyholder has passed away, and the policy lapsed due to non-payment, you may still be able to receive the benefits if you can prove that the insurance company failed in properly sending the cancellation notice. In such a case, consulting with a life insurance attorney is advisable to assess whether the claim denial due to policy cancellation is unjustified.

The laws that govern lapses in life insurance policies are vast, and they set out specific procedures for how insurers must handle the termination of policies due to non-payment. These laws require insurers, including companies like Lincoln Heritage, Midland National, and USAA, to notify policyholders of an impending lapse and cancellation, and they specify how such notices should be sent. In some jurisdictions, the law places the burden on the insurance company to prove that the policy was properly canceled before the policyholder's death. Insurers may be able to create a presumption that the policyholder received a cancellation notice by detailing the company's standard procedures for mailing such notices or by providing proof of actual mailing.

However, in certain jurisdictions, even if the insurer can prove the notice was sent to the insured's last known address, a beneficiary may be able to challenge the manner in which the notice was sent. This challenge could result in invalidating the policy's rescission, thereby reinstating the benefits and allowing the beneficiary to collect the payout. It is crucial to understand that, depending on the state in which the beneficiary resides, they may have grounds to contest the policy’s cancellation. Thus, it is important to seek the expertise of an attorney specializing in life insurance law to evaluate the viability of challenging a claim denial due to a policy lapse.

When a life insurance policy lapses due to missed premium payments, there is a process through which policyholders can attempt to reinstate their coverage. Insurance companies, including The Hartford, Jackson Life, and Symetra, generally provide policyholders with a 31-day grace period following a missed payment, during which the policy remains active. This grace period offers policyholders the opportunity to pay the overdue premium and restore their coverage. However, if the policyholder fails to pay within this grace period, the policy will be considered lapsed, and the coverage will be canceled.

Once the grace period expires, the insurer may allow a reinstatement period during which the policyholder can request reinstatement. This process typically involves submitting an application, answering health-related questions, and paying any outstanding premiums. Reinstating a lapsed policy is subject to specific procedures that vary from insurer to insurer. Most insurers, including Foresters, Lumico, and MetLife, allow a reinstatement period of about five years, within which policyholders can request reinstatement, provided they fulfill all necessary requirements, including settling any past-due premiums.

Despite the availability of grace and reinstatement periods, insurance companies often try to deny valid claims based on lapses in payment. Many beneficiaries are unaware of the rights they possess to challenge such denials, and insurers, like Prudential, Sagicor, and State Farm, may count on this lack of knowledge to avoid paying out claims. If you have been affected by a claim denial due to a lapsed policy, it is essential to consult an attorney with experience in handling such cases. An attorney can help ensure that the insurer is held accountable for any failure to follow proper procedures and may be able to overturn the denial and secure the rightful payout for the beneficiaries.

Life insurance serves as an important financial tool, providing families with the means to cover living expenses and other financial obligations after the policyholder’s death. In many cases, life insurance payouts serve as a financial lifeline, helping surviving family members avoid financial hardship. Policyholders typically pay regular premiums throughout their lives to ensure that their beneficiaries will receive a lump sum payment upon their passing. As long as policyholders continue to pay their premiums, they maintain the security of being insured and the comfort of knowing their loved ones will be financially protected.

For many people, their life insurance policy remains unchanged for years, with the premiums continuing to be paid on time, year after year. During this time, policyholders may never have to deal with questions about their health, as long as they are current with their payments. However, as a person ages, health issues may arise, which is why continuing to maintain a life insurance policy can become even more important as time goes on. A policyholder who was in excellent health at the time of obtaining their policy may begin experiencing health challenges as they grow older, and avoiding the need to disclose these health issues to the insurer can result in keeping premiums at a lower rate.

Despite the importance of maintaining a life insurance policy, there are times when policyholders may find themselves in situations where they miss premium payments. Life, with all its financial and personal challenges, can lead to missed payments, and this is where things can get complicated. Can a policyholder's life insurance policy be canceled if a premium is missed? And if the policyholder dies while a premium is overdue, does that mean the beneficiary will lose the benefit that was intended for them?

We all face financial challenges at one point or another, whether we live paycheck to paycheck or have savings set aside for emergencies. Regardless of our financial situation, there are times when we are unable to pay all of our bills. When that happens, the difficult decision of which bills to prioritize must be made. Often, bills such as mortgage payments, car payments, and utilities take precedence, while other bills—like credit card payments or life insurance premiums—may be put on the back burner.

From a life insurance perspective, it is crucial to prioritize paying premiums. By doing so, you ensure that, in the event of your death, your beneficiaries will receive the financial support they need, and the life insurance policy remains intact. If, however, you are unable to make the premium payment on time, the insurance company typically allows for a 30-day grace period during which the policy will not be canceled. This means that if the premium is due on February 1 and the policyholder passes away on February 27, the life insurance company will still be obligated to pay the beneficiaries, provided that the policy was still within the grace period.

That being said, life insurance companies, including AAA, Ameritas, and Globe, are not always inclined to honor their obligations, and there are instances when they will try to deny a claim despite the fact that the policyholder was within the grace period. In these situations, beneficiaries may face the frustrating challenge of contesting a claim denial. As attorneys who specialize in such cases, we are committed to pushing back against such denials and ensuring that beneficiaries receive the benefits they are entitled to.

Once the grace period ends, the policyholder’s coverage will be canceled unless they take action to reinstate the policy. Most insurers, including American National, Aetna, and Progressive, provide a reinstatement period, typically lasting between 30 and 60 days. During this time, the policyholder can restore their coverage by paying the overdue premiums. However, this process often involves filling out new health questionnaires and possibly undergoing medical examinations. If the policyholder’s health has deteriorated since the policy was first issued, the insurer may decide to refuse reinstatement or impose higher premiums.

In the unfortunate event that the policyholder dies during the reinstatement period, the insurance company, such as Prudential, Securian, or State Life, may deny any claim made by the beneficiary. In such cases, the denial can be difficult to overcome. However, this does not mean that the insurance company is always in the right. If you are facing a claim denial due to late payments or non-payment, consulting with a life insurance attorney is essential. An attorney can review the details of your case, provide a comprehensive evaluation of the denial, and work to recover the life insurance benefits that are rightfully owed to you.

If you find yourself in this position, do not hesitate to reach out to us. We offer free consultations to discuss your case and provide an honest assessment of your options. If we believe you have a strong case, we will represent you with no out-of-pocket costs, only collecting fees if we recover on your claim. We have successfully contested life insurance claim denials time and time again, and we are here to help you navigate this difficult process.