What is a life insurance policy lapse?

What happens if I miss a life insurance payment?

If you miss a life insurance payment, in most cases, you'll have a grace period. A grace period gives you time to catch up on payments before your coverage officially lapses.

Missing a life insurance payment can have consequences. If you don't act within the grace period, your policy lapses, and your coverage ends. Beneficiaries won't be able to claim the death benefit. If you decide to reinstate your policy later, you may face higher premiums or need to undergo a health reassessment, which could make the policy more expensive.

Your insurer is legally required to notify you when you've missed a payment, and your policy is in danger of lapsing. They must also alert you once the policy officially lapses.

The repercussions of a lapsed policy might vary depending on whether you have term or whole life insurance:

Permanent life insurance lapse

With permanent life policies, such as whole life, the insurance company will use the cash value of the policy to cover your premium if you miss a payment. If there isn't enough cash value in the policy to pay the premium, or once the cash value has been used up due to continued non-payment, your policy will slip into the grace period. Your policy will officially lapse once the grace period ends, meaning your coverage will end and no death benefit will be paid.

Term life insurance lapse

A term life insurance policy usually has no cash value, so once you miss a payment, the policy immediately moves into a grace period. If a payment isn't received by the end of the grace period, the policy lapses. Your beneficiaries will likely not be able to claim your death benefit, and you'll lose the premiums you've already paid.

How does a life insurance grace period work?

During the grace period, you can reinstate your life insurance policy simply by paying the outstanding premium and any associated late fees. Grace periods typically last around 30 days, depending on your policy. Under certain circumstances, some insurers may extend it up to 60 or 90 days. Refer to the grace period provision in your policy contract for grace period details.

If you die during the grace period without paying your premium, your insurer is legally required to still review your beneficiaries' claims for the payout, though missed payments will be deducted from the total payout. Your policy's cash value might be used to pay off your unpaid premium.

How do I prevent a life insurance lapse?

Preventing a life insurance lapse is essential to ensure your coverage remains in force. Here are a few practical steps to avoid missing a payment:

• Set up automatic payments: Most insurers offer automatic premium payments from your bank account or credit card.
• Switch to an annual payment schedule: If your budget allows, switch to an annual payment schedule. Making one payment each year instead of monthly means you'll have fewer due dates to track.

How can I reinstate my life insurance policy?

Reinstating your lapsed life insurance policy typically involves meeting specific requirements. Follow these steps to get started:

1. Review your policy's reinstatement provision
   Check your life insurance contract to understand the requirements before reinstating your policy. It outlines the timeframe and conditions you must meet. For example, yours might state if your policy lapses for more than 60 days, your insurer may require you to provide evidence of insurability to reinstate it.
2. Provide evidence of insurability (if required)
   To provide evidence of insurability, you may need to confirm that your health hasn't changed since the policy was written or complete the life insurance application and underwriting process again.
3. Pay all overdue premiums and penalties
   Regardless of when you reinstate your policy, you must pay all overdue premiums and penalties that have accrued.
4. Contact your insurer
   They can guide you through the process and provide additional information specific to your policy.

If reinstating your policy isn't an option, there are other alternatives to ensure you maintain coverage and protect your loved ones. Start by shopping around for a new policy and comparing quotes from different insurers. Online tools can help you explore your options quickly.

If a term or permanent policy isn't feasible, you may want to look into other coverage types:

• Simplified issue life insurance
• Guaranteed issue life insurance
• Group life insurance through an employer

How to get life insurance through Progressive