There’s no denying that life insurance is important, and the insurance premiums must be paid timely to ensure financial safety for your family if something unexpected happens to you. But sometimes, premiums can remain unpaid, resulting in a life insurance policy lapse.
As a policyholder, if you’ve failed to make payments, whether you missed them or couldn’t keep up with the premium cost, your policy will be terminated. The death benefit will not be paid to the beneficiary until all your due premiums are cleared.
Our life insurance lawyers fight denied claims due to a lapse.
Is there a grace period for a life insurance lapse?
Most insurance providers offer a grace period before premiums become overdue. The policy will not be immediately terminated if the premium isn’t timely paid. You’ll have a predetermined number of days to make the outstanding payments, and as long as you do so within that given timeframe, your policy won’t lapse. Usually, you’ll have 30 to 31 days of leniency.
The policy is still in effect during the grace period. Although, if, due to unexpected circumstances, you pass away during the grace period, your beneficiaries would still receive the payment. However, the insurance company will likely withhold the outstanding amounts from the total payout figure.
Can you reinstate your lapsed life insurance policy?
Yes. If your insurance coverage expires, you don’t lose everything at once. There’s a reinstatement clause in the life insurance policy document that spells out the conditions of reinstatements.
Insurance companies encourage reinstating a lapsed policy and can support you throughout the process. Although, you’ve got a time frame of typically two years. For example, if your coverage has been terminated for more than 60 days, the terms may state that you must submit evidence of insurability before it can be reinstated. You can either reapply for life insurance or go through the process again to verify that your health has not changed after the policy was granted.
For more information, you can read the reinstatement clause in your contract to determine what steps you need to take. Remember that you’ll have to pay all outstanding premiums and fines irrespective of when you reinstate your coverage. Getting in touch with your insurer is the first step in the reinstatement procedure.
How to prevent a life insurance lapse?
Letting your life insurance policy lapse is not a wise decision. It can create challenging and expensive problems. Therefore, it’s better to avoid life insurance lapses.
Here are some ways you can do this:
- Sign up for the automatic payment option to reduce the possibility of overlooking the payment. Your premium will be deducted automatically from your account.
- Adjust your life insurance coverage to a cost you can pay at your convenience and financial means. You can lower your premium, but it’ll ultimately reduce the death benefit.
- Get a ‘no lapse’ insurance policy. You can also opt for a single premium life insurance which will eliminate the chances of lapsing your policy.
Even if you’ve previously let your life insurance lapse, you can take these simple steps to prevent another lapse in the future.
The Last Note
A life insurance policy lapse can be expensive to reinstate. However, if there’s a valid reason, make sure that you consider your financial commitments and objectives before you decide to let your policy lapse.
Contact a life insurance lawyer to investigate a denied life insurance claim due to a lapse.. It’s worth trying to find the best alternative because once you’ve lapsed or sold your policy, you lose that coverage.