Just like any other insurance policy, you must make regular premium payments to your life insurance policy for it to remain in good standing — and provide death benefits to your loved ones — even though you probably think about that policy a lot less than you do your auto or health insurance.
The financial aspects of life insurance are of concern for many people considering purchasing a policy. Read on for information on paying your premium, what happens if you fail to pay your premiums, and what happens if your policy lapses.
How often do you have to make life insurance premium payments?
As with other insurance policies, you’ll have to pay regular premiums on your life insurance policy. The cost of those premiums, as well as the frequency, depends on the policy you select.
Some insurance providers offer a variety of payment options:
- Annually (once per year)
- Semiannually (twice per year)
- Quarterly (four times per year)
- Monthly
How can I avoid missing premium payments?
- Pay your premium annually — that’s one single payment to remember, rather than up to 12
- Set up an electronic funds transfer (EFT) or other regular withdrawal through your bank to automate the payment process
What happens if you miss a life insurance payment?
What happens if you miss your life insurance payment depends on the type of life insurance you have:
Permanent life insurance
These types of insurance, like whole life insurance, often have a cash value that may grow over time. If you stop making payments but your policy has built up sufficient cash value, it could be used to cover the cost of your premiums to keep the policy active. If the cash value amount is not sufficient to provide a benefit for your whole life, your policy will officially lapse, and your life insurance benefit will end when premiums are not paid when due.
Term life insurance
If you miss a premium payment on a term life insurance policy, the grace period to bring your account back into good standing begins — after which the policy will lapse.
Your life insurance contract will detail when your premium is due and what happens when premium is not paid on time. When your policy is delivered, take time to read the contract to see what your specific rights will be.
What is the grace period on a life insurance policy?
Your grace period — the amount of time you have to make a payment after the due date and bring your life insurance policy back to good standing — is usually 30 days, but it depends on your policy and insurance provider.
Double check your policy documents or ask your insurance provider’s customer service department if you’re unsure of your policy’s grace period.
Can a lapsed life insurance policy be reinstated?
Individual insurance companies have differing policies, so if you’re past your grace period, review your insurance contract and call to find out whether your life insurance policy can be reinstated.
In some cases, it’s as simple as filling out a reinstatement application and paying the difference in premium since your policy lapsed. In others, you may have to undergo a medical exam to ensure your health condition hasn’t changed dramatically since you purchased the policy.
Bottom line: The right to ask your insurer to reinstate a life insurance policy is often included in life insurance policies when you’ve missed a payment. But the opportunity to reinstate is limited by time. So, familiarize yourself with this important option in case your coverage ends when premiums are not paid. Many insurance providers are more than willing to work with you to catch up on payments and bring your policy back into good standing. But you’ll never know if you don’t try.
FAQs
If you ignore your premium payment during the grace period, your policy will lapse, and your coverage will end. You may be able to have it reinstated, but chances are you'll have to go through medical exam underwriting and have to pay higher premiums.
What happens if you miss a payment for life insurance? ›
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.
What happens if you miss one insurance payment? ›
You may be considered a high-risk driver by insurers. This causes your premiums to rise substantially. Also, missed payments may stay on your insurance record for up to three years. And, if you don't pay by a specific date, the insurer could send it to a collection agency.
Is there a grace period for life insurance premiums? ›
You Can Miss a Payment Without Losing Coverage
Most policies have a 31-day grace period after your premium's due date.
What is the grace period for premium payments? ›
The grace period, means it is a time the insurance provider gives after the due date to pay your premium before the policy becomes inactive. The grace period can differ between insurers and the type of policies. This time frame is indicated in the policy's terms and conditions, usually between 15 days to 30 days.
What happens if premium is not paid? ›
Your insurance will be cancelled if, for whatever reason, you are unable to pay the premium due, even within the grace period offered by the insurer. It also depends on a number of other things, the most significant of which is the kind of insurance policy you have.
Is it possible to pause life insurance payments? ›
If you stop making payments on term life insurance, the policy will lapse and end after the grace period. If your payments stop on a cash value life insurance policy, the insurer will generally use any cash value in the policy to cover the premiums. Once the cash value is exhausted, the policy will end.
Can you get money back from a lapsed life insurance policy? ›
Some insurance policies include a nonforfeiture clause, which means that if you stop paying premiums, you still receive some sort of benefit. You can think of this as a lapsed policy refund. If your coverage lapses, the insurance company will refund part of your premium payments and/or pay you the policy's cash value.
How long can life insurance lapse? ›
That period is usually 30 or 31 days and begins on the due date of your missed payment. During the grace period you're still fully covered by your policy, so your beneficiaries will receive the death benefit payout if you die. But you need to pay your missed premium to keep your policy active past 30 or 31 days.
How many days of grace are there in a life insurance policy? ›
It is usually 30 days for annual, bi-annual, and quarterly premium payment modes, but it can be 15 days for monthly premiums. The provider will inform you before your due date and also afterwards to inform you that you have now entered your grace period.
In the case of LIC policies, the grace period typically ranges from 15 to 30 days from the premium due date. Policyholders should check their policy documents or contact LIC customer service to ascertain the exact grace period duration applicable to their specific policy.
What happens if a premium payment is made late but within the grace period? ›
If, by the end of the 90-day grace period, the amount owed for all outstanding premium payments is not paid in full, the insurer can terminate coverage. In addition, during the first 30 days of the grace period, the insurer must continue to pay claims.
Does your insurance become invalid if you miss paying the premium on the due date? ›
If you don't pay by the due date, the insurer will send you a reminder. The policy will stand for a grace period of 15 days to a month. If you still haven't paid, the policy is cancelled. There are things you can do to reduce your premium.
How many days late can you be on insurance? ›
Many insurance companies offer grace periods seven to 30 days after the due date. During your grace period, your coverage remains active, and you can pay your bill without penalties. Be sure to review your policy or contact your insurance company for more information on their late payment policy.
What life insurance policy allows you to skip a payment? ›
Universal life is also the most flexible of all the various kinds of policies. Because it treats the elements of the policy separately, universal life allows you to change or skip premium payments or change the death benefit more easily than with any other policy.
Does life insurance pay out if you go missing? ›
When a person goes missing, their family often endures overwhelming emotional, legal, and financial challenges. If that person had life insurance, their loved ones may be entitled to a payout, which could alleviate some stress during an already difficult time.
