A life insurance policy will lapse, or cease to exist, when the planned premium is not paid on a timely basis. Most policies have a grace period, usually 30 days, in which the back premium can be paid before the policy lapses.
In some cases a carrier will reinstate a lapsed policy if the back premiums are paid and the insured signs a statement indicating their health has not changed since the last premium was paid.
While the term lapse is commonly used, the technical definition of a lapse is a policy that terminates when there is no cash surrender value. A surrender would be the alternative to this, which is a policy that terminates with cash surrender value.
A policy will terminate if premiums are not paid on time or there is not enough cash value in the policy to cover policy charges when due.
Most states have a 30 day grace period for unpaid premium before a policy terminates. The state of New York requires all policies with a non-forfeiture benefits (i.e. any policy with a cash value) to have a 60 day grace period.
If your life insurance policy lapses, it means that your coverage has ended. In order to reinstate it, you will have to prove that your health has not changed. If that is not possible, you will have to get a new policy with new rates.
In my experience, the most common reason for a policy lapsing is people moving and forgetting to tell the life insurance company their new address. This is most common if paying annually, as the post office forwarding period may not catch the notice.
To avoid your policy lapsing, be sure to keep your current address and checking account on file at the insurance company. Many companies will allow you to set up a secondary address to which notices can also be sent. If you use online banking, set a warning if your life insurance premium is not paid.
Treat your life insurance payment as you would or mortgage or auto loan payment. Especially if you are getting older or have had a change of health since you first purchased your policy, protecting you policy will be worth it.
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In some cases a carrier will reinstate a lapsed policy if the back premiums are paid and the insured signs a statement indicating their health has not changed since the last premium was paid.
A policy will terminate if premiums are not paid on time or there is not enough cash value in the policy to cover policy charges when due.
Most states have a 30 day grace period for unpaid premium before a policy terminates. The state of New York requires all policies with a non-forfeiture benefits (i.e. any policy with a cash value) to have a 60 day grace period.
In my experience, the most common reason for a policy lapsing is people moving and forgetting to tell the life insurance company their new address. This is most common if paying annually, as the post office forwarding period may not catch the notice.
To avoid your policy lapsing, be sure to keep your current address and checking account on file at the insurance company. Many companies will allow you to set up a secondary address to which notices can also be sent. If you use online banking, set a warning if your life insurance premium is not paid.
Treat your life insurance payment as you would or mortgage or auto loan payment. Especially if you are getting older or have had a change of health since you first purchased your policy, protecting you policy will be worth it.