Can You Still Receive Life Insurance Benefits If Premiums Go Unpaid?
In most cases, if a policyholder stops paying premiums on a life insurance policy, the policy may lapse or be canceled. However, the rules around nonpayment—and the impact on beneficiaries—can be complicated. Some states require insurers to honor claims under certain conditions, while others give insurance companies wide latitude to deny payouts if coverage has lapsed.
This article explains what typically happens when life insurance premiums go unpaid, and the limited legal options available for beneficiaries seeking payment after a policy has been canceled due to nonpayment.
Why Life Insurance Payments Are Often Put Off
We all face financial hardships from time to time—lost jobs, medical bills, or the expense of raising a family can make it hard to stay current on all your financial obligations. And in that struggle, life insurance premiums often fall to the bottom of the priority list.
After all, life insurance is a benefit you don’t expect to need any time soon. When you’re living paycheck to paycheck, it’s hard to justify paying for a policy that only pays out when someone dies. Unfortunately, that mindset can lead to devastating consequences for the surviving family members—especially if the insured dies while the policy is in a lapse or cancellation period.
The Grace Period: A Temporary Safety Net
Most life insurance policies contain a grace period of about 30 days after the premium due date. During that time, coverage remains in place—even if the payment is late.
For example, let’s say Bill’s premium was due on January 15. He misses the payment but tragically dies in a car accident on February 2. His wife, Melody, is the named beneficiary of his $400,000 policy. Because Bill died within the grace period, Melody’s claim would likely still be approved, assuming all other policy terms were met.
The grace period is designed to account for temporary lapses or oversights. But once that period ends, policy cancellation can occur—and the consequences are far more serious.
What Happens After the Grace Period Ends?
When a life insurance policyholder fails to make a payment and the grace period expires, the insurer has the legal right to cancel the policy. At this point, the death benefit is no longer guaranteed—even if the insured dies shortly after the cancellation date.
In most cases, here’s what happens next:
The policy is terminated. If Bill dies on February 20—five days after the grace period ends—Melody’s claim would likely be denied. The insurer would say the policy was no longer active at the time of death.
Reinstatement may be possible. Many policies allow for reinstatement within a specific window—usually 60 days to six months after cancellation. But reinstatement isn’t automatic, and it comes with several caveats.
The Reinstatement Process: Not Always Simple
While reinstating a lapsed policy may sound like a solution, it can introduce serious challenges—especially if the insured’s health has declined since the policy was originally issued.
In most cases, reinstatement requires:
Repayment of all missed premiums
Completion of a new application
Updated health disclosures or even a medical exam
Let’s return to Bill’s example. When he got his $400,000 policy at age 43, he was in excellent health. His premiums reflected that. But at age 58, Bill is heavier, pre-diabetic, and has developed a heart murmur and asthma.
Even if Bill qualifies for reinstatement, he’s likely to face:
Significantly higher premiums
Exclusions for new conditions
Possibly even a rejection for coverage if the insurer deems him too high-risk
This is especially dangerous for families who already struggle to pay bills—making it a lose-lose situation for those trying to recover from missed payments.
Can Denials Based on Nonpayment Be Contested?
Sometimes—but not often. While we’ve had success fighting wrongful claim denials in other areas (like misrepresentation or delayed investigations), claims denied due to policy lapse for nonpayment are legally much harder to contest.
That said, there are limited circumstances where a challenge may succeed:
The insurer failed to provide required cancellation notices
State laws require extended grace periods under certain conditions
The policy had a nonforfeiture clause that converted it into a reduced-benefit or paid-up policy
The insured submitted a reinstatement application before death
Still, in most cases, if the policy was canceled due to nonpayment and death occurred after that date, beneficiaries are out of luck.
A Cautionary Tale: Why Life Insurance Premiums Should Be Prioritized
At our firm, we regularly hear from grieving spouses or children who were financially dependent on a now-deceased loved one. They’re stunned to learn that the life insurance policy they were counting on was canceled due to missed payments—and that there’s almost nothing we can do to overturn the denial.
While we are always happy to review the circumstances surrounding a claim, the truth is this: once a policy has lapsed, our legal tools are often limited.
That’s why we strongly encourage families to:
Set up automatic premium payments
Designate a backup contact person to receive notices if payments are missed
Contact the insurer proactively if financial hardship arises
Review grace periods and reinstatement terms before skipping any payments
It’s also wise to regularly review your policy to ensure it's active and up to date.
We Review All Denials—Including Lapsed Policy Disputes
Even in difficult cases, there may still be room to fight. If you've received a life insurance claim denial based on policy lapse or nonpayment, contact our office. We’ll review your situation at no cost and let you know whether legal action is possible.
Call us today for a free consultation. We only get paid if we recover for you.