If you don’t pay your life insurance premiums, your coverage lapses. You can get your coverage back in some cases. That may be better than buying new life insurance, but not always.
If your life insurance policy is short of money on a payment date, you’re in default. But you don’t lose your coverage immediately — instead, you often get:
- A grace period of 30 or 31 days (during which your insurance continues).
- A payment reminder letter.
In addition, your insurance advisor is also notified. You might still not act in time. Perhaps:
- You don’t have the money.
- You’re traveling for pleasure or work.
- You’re preoccupied with other matters such as a family emergency.
You may be able to reinstate your insurance after a lapse. If approved, it’s like your coverage never ended — but not quite. You’ll find the specific conditions in your policy contract. Here are examples of simplified requirements:
- You ask in writing within two years and before a maximum age.
- You submit information (called “evidence of insurability”) to help the insurance company decide whether to insure you. This is like applying for new insurance but now you pay the costs. You may be placed in a different risk class.
- You submit a processing fee.
- You pay all premiums missed until the reinstatement date, plus interest at a rate set by the insurance company.
- The two-year contestability period starts again.
- The two-year suicide exclusion period starts again.
Overall, the process discourages reinstatements.
Consider new insurance
You may benefit from buying new life insurance instead. Because you’re older and perhaps less healthy, your premiums will be higher. However, mortality rates have been improving and premium rates may have dropped. The cost might not be much more.
Your situation has likely changed since you bought the life insurance that lapsed. You might need:
- A different amount of coverage (more or less)
- Coverage for a different length of time (shorter or longer)
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If you pay your premiums by pre-authorized withdrawals, you just need to make sure you have money in your bank account. If you pay annually, you get an invoice that you might overlook. Suppose you’re on vacation. Make sure your insurance company knows your current address. Some universal life policies can provide quarterly statements by mail. If you select this option and move, you’re more likely to notice that you didn’t get a statement. The insurance company will too.
Keeping your insurance is better and easier than trying to get it back.
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