What happens if you did not pay your life insurance premium? Is the policy still in effect?
An insurance company may deny a claim for benefits when the insured has not paid premiums in a timely manner. If benefits have been denied, or if a policy has been terminated under these conditions, contact our life insurance denial lawyers immediately. Time is a critical factor in these cases.
As with any insurance, failing to pay premiums can result in a lapse of coverage. This means that beneficiaries will not be eligible for death benefits, and the policy is forfeited. But missing some payments is not always cause for a denied policy. Most states’ life insurance laws protect a policy from immediate cancellation because of a late payment.
Insurers generally offer policyholders some form of grace period for missed payments. Grace periods are contingent on how the premium payments are set up (monthly, quarterly etc.) Typically there is a 30 or 31-day grace period to make up for a missed payment. In most cases with missed payments on term life policies:
- If you are the insured and you miss a payment: you can keep the policy in force by catching up.
- If the insured dies within the grace period: beneficiaries are awarded the death benefits that remain once the missed payment is deducted.
- If the insured dies after the grace period expires: a lapse in coverage (and forfeiture of the policy) would take effect; beneficiaries do not receive the death benefit.
A lapse in payment of permanent or whole life policies may have different options. To avoid a lapse in life insurance coverage, an insurer may apply accrued cash value to offset missed payments. However, if the cash value is less than the amount due, or if the cash value runs out and can no longer compensate for the missed premiums, the insurance coverage will expire.
Reinstating a Life Insurance Policy after a Lapse of Coverage
If an extended interruption to paying premiums occurs and coverage does lapse, you may still be able to take action to reinstate your policy. Make every effort to work within the grace period. Reinstatement may require an additional medical exam, and the period of contestability may be start over on reinstatement of the policy.
Sometimes in the months preceding an insured’s death, the insured may gradually become unable to physically or mentally take care of life insurance payments. After the insured has passed away and the beneficiary sets about to collect a life insurance claim, they discover that the deceased had neglected to pay the premiums for several months. The life insurance coverage has lapsed and the policy is no longer in effect.
How We Can Help
Even if the grace period has been missed, our lawyers may still be able to restore “lapsed” coverage and recover life insurance benefits.
- Has the insurer made a good faith effort to contact the policyholder about the missed payment?
- Have they tried to sweep the grace period clause under the carpet?
- Was a missed premium payment lost or delayed through no fault of the policyholder?
- Has the life insurance company dealt unfairly with the policyholder or beneficiary?
- Sometimes the policyholder pays the premiums, and sometimes the policyholder’s employer pays the premiums. In cases where an employee is transferring from group to individual life insurance, that employee may be cleared on filing a late application for life insurance conversion coverage.
Many other scenarios may occur that we can assist with.
If you have experienced lapse of coverage due to late payments, missed payments, or similar unintended procedural events that led to lapse of coverage, our life insurance attorneys will protect your rights to reinstate coverage.
Contact Marc Whitehead & Associates at 800-562-9830 quickly for a free and thorough review of your situation.