What Happens When You Miss a Life Insurance Payment

by Kerri-Lynn McAllister March 2, 2016 / No Comments

When you have a life insurance policy, you need to make your regular payments. If you don’t, you might lose your coverage.

If your insurance policy doesn’t have enough money in it to cover the charges, you’ll be notified generally by mail. If you don’t respond, you may get another warning. If you still don’t act, you’ll be informed that your coverage has been cancelled. You don’t want to receive that letter! Your advisor will also be notified each time and may contact you to help.

Missing a payment may or may not be a problem depending on the type of insurance you have.

Term life or term 100—With term life insurance, each premium matters because you don’t build tax-sheltered savings from which to make payments. If you pay annually by cheque, you’ll receive a bill each year. To make things easier, you may prefer monthly withdrawals from your bank account although this costs more. If you miss a premium, you’ll be notified.

Whole lifeIf your policy has savings inside, an automatic premium loan may be made. Your coverage continues as long as your policy is able to support the loans and loan interest. When that’s no longer possible, you’ll be notified.

Universal life—Universal life works like a bank account. Each month, premiums and investment returns get deposited, while insurance charges and administration charges are deducted. If you pay more than the minimum premium and your investments grow, you have a cushion that allows you to skip premiums without penalty. If the savings are exhausted, you’ll be notified.


If your life insurance gets cancelled, you may be able to get your coverage reinstated. The process is much like applying for new life insurance. You’re also required to pay the missing premiums with interest. You might want to compare the costs against buying new coverage.

Protecting yourself

Here are ways to protect yourself from losing your life insurance:

Plan for surprises—The unexpected happens. If your bank account balance drops below zero while you’re on an extended vacation, will you find out in time to prevent bounced cheques or withdrawal requests? If you change banks, have you notified your insurance company?

Keep your current contact information updated—Inform your insurance company and insurance advisor. Otherwise you may not get their reminders.

Pay more than the minimum premium—Keep a float in your universal life insurance. You’ll also get tax-sheltered growth.

Consider a quick-pay option—Some plans let you pay premiums over a shorter period like 10 or 20 years and get guaranteed coverage for life. You don’t have to worry about payments afterwards.

Flickr: Got Credit