What happens if life insurance lapses

Keep in mind, however, that grace period payments are usually substantially higher than regular payments. After the grace period expires, your policy is officially void in most cases.

Nonetheless, some insurance companies offer a period, known as a reinstatement period, during which you can renew your policy. You should always be aware of whether your insurance provider offers such an option. In the vast majority of cases, where applicable, you can reinstate your policy without underwriting within a month of your policy lapsing. However, if you exceed your reinstatement period, the insurance company will most likely want to find out if your risk profile has changed.

Thankfully, the underwriting process that is required with reinstating a policy is much less time-consuming and grueling than the initial process of taking out a life insurance policy. Reinstating a policy always comes with fees. However, on the whole, reinstating a policy is much cheaper than taking out a new life insurance policy altogether.

If you do not reinstate the policy, it will lapse. The simplest way to find the answer to this question is to ask yourself: If I died tomorrow, would anyone who depends on me face significant financial challenges? Keep in mind that renewing your policy always comes with much higher premiums — and since the policy is renewed year after year, it is perfectly reasonable to explore whether paying for such coverage has continued value.

If your family is in a position to keep up with their regular payments mortgages, auto loans, student debt, etc. The purpose of life insurance is to keep our loved ones financially secure if we should pass — and if the criteria listed above have been met, your family is likely to already be in a secure position. Thus, renewing your policy could have the sole effect of putting undue strain on your finances.

Although premiums are higher when you renew a life insurance policy, you can still opt to sign up for a payout that is smaller, yet more affordable for your current needs.

Keep in mind that some employer-sponsored policies can come with tax benefits. If they will need the death benefit to pay off a mortgage, fund a college education, or just cover day-to-day expenses, a lapsed policy will leave them unprotected. Lapses can happen for a number of reasons. Regardless of the reason, a life insurance lapse can have serious consequences for your family, and reinstating the policy quickly is important.

Life insurance policies are a bit different from other insurance products with regard to a lapse. A car or homeowners policy lapses as soon as you fail to make a premium payment on time. This may not be the case with life insurance, depending on what type of policy you have.

One other major difference with life insurance is the grace period. Every state requires a grace period before a life insurance lapse. The grace period varies between states and insurance companies, but 30 days is pretty standard.

Once you miss a premium payment, the policy goes into the grace period, which means that if you die within the grace period usually 30 days , the insurer will still provide coverage and pay the death benefit. Once the grace period is over, the policy is considered lapsed and the death benefit will not be paid.

Reinstating your policy simply means that the policy becomes active again and will provide the coverage outlined in the policy and pay a death benefit. In most cases you can reinstate your life insurance policy within a certain time frame if you start making premium payments again and meet certain requirements. Reinstatement is not a legal right, so the ability to reinstate and the requirements to do so vary by insurance company. Review your policy to verify that reinstatement is possible and what the requirements are.

The policy for which all benefits to the policy holder cease and which gets terminated due to non payment of premium amount on the due date or even after the grace period is called a lapsed policy. If the due premium is not paid beyond the grace period, the policy lapses, thereby leading to termination of all the benefits and coverages provided under it.

You should make it a habit to set reminders for premium payments of your insurance policies. However, a lapsed or dead insurance policy may be revived by fulfilling the terms and conditions as per the policy statement. Insurance companies also come up with policy revival campaigns encouraging people to reinstate their lapsed policies extending policy benefits on revival. Read to know the process by which one can reinstate a lapsed policy.

Most companies provide a period of two to three years from the end of the grace period for the reinstatement. The policy document provides this information along with the process to be followed. Check that reinstatement is made during such prescribed revival period. To reinstate a lapsed policy, the policyholder needs to make an application for revival to the insurance company.

The company may prescribe submitting a standard revival form. In certain cases, a medical checkup at the designated medical centre is mandatory. In other cases, a declaration of good health may be required for the revival. Accordingly, you may be asked to undergo health check ups. You should take advice from the insurance agent or visit the company branch to understand the process. To be able to revive a policy, one needs to pay due premiums for all the years since the lapse of policy along with any penalty that the insurance company may levy for non-payment of premiums.

Penalty may differ for different insurers and across cases too. Your premiums, going forward, may be higher too. A reinstated policy is as good as a new one, therefore, the insurance company may impose new terms and conditions.