Life Insurance Lapse and Nonpayment Issues

If your life insurance claim was denied because of an alleged policy lapse, you still may have legal options. Insurance companies frequently claim that coverage lapsed due to nonpayment of premiums — sometimes correctly, but often wrongfully. At Lassen Law Firm, we focus exclusively on helping beneficiaries overturn denied and lapsed life insurance claims nationwide. Christian Lassen, Esq., a life insurance attorney with over 20 years of experience, personally handles every case to ensure experienced, aggressive representation.

If a life insurance policy is claimed to have lapsed, the insurer must prove that proper notice was given and that all legal requirements for cancellation were followed. Beneficiaries have the right to challenge improper lapse denials.

What Is a Lapsed Life Insurance Policy?

A lapsed life insurance policy is one that the insurer claims is no longer in effect because premium payments stopped. Once a policy lapses, coverage ends, and the insurer may deny any claims arising after the lapse date. However, insurers must follow specific legal procedures before terminating coverage, including notice requirements, grace periods, and reinstatement options.

If they fail to do so, the policy may still be enforceable despite a claimed lapse.

Why Life Insurance Policies Lapse

Policies can lapse for various reasons, including missed premium payments, employer errors in forwarding payments, bank draft mistakes, or failures to send required premium notices. Sometimes, insurers wrongfully treat policies as lapsed when proper notice was not given, or when payments were mishandled by the insurer, employer, or bank.

Disputes often arise when beneficiaries believe coverage was still active at the time of death.

How We Help With Life Insurance Lapse Disputes

At Lassen Law Firm, we analyze policy documents, premium payment records, correspondence, and legal requirements for each alleged lapse. We challenge wrongful lapse denials by proving the insurer failed to provide required notice, improperly applied payments, or otherwise violated the law. When necessary, we file lawsuits for breach of contract and insurance bad faith.

For example, we recently recovered $500,000 for a family after the insurer wrongfully claimed a policy had lapsed due to a missed premium — even though proper notices were never sent.

Common Reasons for Alleged Life Insurance Lapses

  • Missed premium payments without proper notice

  • Insurer's failure to send grace period or lapse warning notices

  • Employer's failure to deduct or forward premiums (for group life policies)

  • Bank auto-draft failures

  • Misapplied payments by the insurer

  • Premium notices sent to the wrong address

  • Lapses during medical or mental incapacity periods

  • Policyholder confusion about automatic premium loans

  • Death during grace period not honored by insurer

  • Reinstatement applications mishandled or ignored

What to Do If Your Life Insurance Claim Was Denied for Lapse

If a life insurance claim was denied due to alleged lapse:

  1. Request the full policy history and payment records from the insurer.

  2. Demand a copy of all notices allegedly sent about missed payments.

  3. Avoid accepting the denial at face value without review.

  4. Contact a life insurance attorney experienced in lapse and notice disputes.

  5. Act quickly — legal deadlines to contest wrongful denials are strict.

Prompt action gives you the best chance to recover benefits owed under the policy.

Frequently Asked Questions About Life Insurance Lapse Issues

What is a grace period in life insurance?

A grace period is the time after a missed payment during which the policy remains in force, usually 30 to 60 days depending on state law and policy terms.

Can a policy lapse without sending a notice?

No. In most states, insurers must send a written notice of overdue premiums and warn of pending lapse before terminating coverage.

What happens if premiums are missed but the insurer did not send a notice?

The policy may still be enforceable. Beneficiaries can challenge the lapse based on the insurer’s failure to provide required notice.

Does death during the grace period still allow a claim?

Yes. If the insured dies during the grace period, the policy is still considered active, and benefits should be paid.

Can employer errors cause wrongful lapses?

Yes. In group life insurance policies, employers sometimes fail to forward premiums properly, leading to wrongful lapse denials.

Can banks cause lapses through auto-draft errors?

Yes. If automatic payment setups fail through no fault of the insured, lapses may be challenged.

What is an automatic premium loan provision?

Some policies automatically borrow against cash value to cover missed payments. Failure to apply this correctly can lead to wrongful lapse claims.

Can mental incapacity excuse missed premium payments?

Possibly. Some courts excuse nonpayment if the insured was mentally incapacitated and missed premiums without proper notice.

Can I reinstate a lapsed policy after death?

No. Reinstatement must occur while the insured is alive, but wrongful lapse denials can still be challenged posthumously.

Can insurers deny claims for minor late payments?

Not without following strict notice and grace period rules. Beneficiaries can often challenge technical denials.

How long do I have to contest a wrongful lapse denial?

Deadlines vary by state, but it’s critical to act within 1 to 5 years depending on the policy and jurisdiction.

Does mailing a premium late always cause lapse?

Not necessarily. Payments mailed within grace periods or accepted by insurers may keep coverage active.

How can I prove the insurer mishandled payments?

Bank records, payment receipts, insurer correspondence, and premium notices are key evidence.

What if the insurer mailed notices to the wrong address?

If the insurer used an outdated address despite updated information, lapse denials can often be overturned.

Can a reinstatement application protect coverage?

Possibly. If the insured submitted a reinstatement application before death, it may help challenge a lapse denial.

Is death during COVID-19 affecting lapse disputes?

In some states, special grace periods and protections applied during COVID-19 emergencies. They can help fight wrongful lapses.

Can missing a single payment cause permanent lapse?

Only if the insurer followed all legal notice and grace period requirements. Otherwise, beneficiaries may still recover.

What happens if premiums were misapplied by the insurer?

Misapplied premiums can lead to wrongful lapses — and courts often hold insurers accountable for these errors.

How can a lawyer help with a lapse-based claim denial?

An attorney can obtain records, challenge improper lapses, negotiate settlements, and litigate if necessary to enforce payment.