Life Insurance Lapse and Nonpayment Issues
Christian Lassen, Esq. | Quoted in The Wall Street Journal | 25 Years Experience
If your life insurance claim was denied because the insurance company claims the policy lapsed for nonpayment, the denial may be wrong. Lapse based denials are among the most frequently challenged life insurance disputes because insurers must meet strict legal and contractual requirements before terminating coverage.
At Lassen Law Firm, we focus exclusively on helping beneficiaries challenge denied life insurance claims nationwide, including wrongful lapse and nonpayment denials. Christian Lassen, Esq., has 25 years of experience handling life insurance disputes and personally reviews every lapse case to determine whether coverage was improperly terminated.
When a Life Insurance Policy Can Be Declared Lapsed
A life insurance policy does not automatically lapse when a premium is missed. Before coverage can be terminated, insurers must comply with specific legal and policy requirements. These requirements often include advance written notice of nonpayment, a mandatory grace period, and clear warnings explaining the consequences of lapse.
Many policies also allow reinstatement after lapse, especially when nonpayment was caused by illness, incapacity, administrative error, or payment mishandling. If an insurer fails to follow lapse and notice procedures exactly, the policy may still be enforceable at the time of death.
Why Life Insurance Policies Are Wrongfully Declared Lapsed
Insurance companies frequently declare policies lapsed based on incomplete or inaccurate payment records. Premium payments may be misapplied, miscredited, delayed, or lost by the insurer, employer, bank, or plan administrator.
In group life insurance policies, employers may fail to deduct or forward premiums properly, yet insurers still deny claims. In individual policies, automatic bank drafts may fail due to technical issues, and insurers sometimes declare lapse without sending proper notice.
Notices are also frequently sent to outdated or incorrect addresses, making the lapse ineffective under the policy or governing law. These failures often result in wrongful denials that can be challenged successfully.
Common Reasons Insurers Claim a Policy Lapsed
Life insurance lapse denials commonly involve one or more of the following issues:
• Alleged missed premium payments without proper notice
• Failure to send required grace period or lapse warnings
• Employer failure to deduct or forward premiums
• Automatic bank draft or billing errors
• Misapplied or miscredited payments
• Lapse notices sent to incorrect addresses
• Nonpayment during illness or mental incapacity
• Confusion involving automatic premium loans
• Death occurring during the grace period
• Mishandled or ignored reinstatement applications
Many of these defenses fail when the insurer is required to produce proof of compliance.
How We Challenge Lapse and Nonpayment Denials
We challenge lapse denials by conducting a detailed review of the policy terms, premium history, correspondence, and applicable notice requirements. We demand proof of all lapse notices, grace period compliance, and proper payment handling.
When insurers cannot establish strict compliance, we pursue reversal of the denial through appeal or litigation. We regularly file lawsuits for breach of contract and insurance bad faith when lapse denials are unsupported by the evidence.
Many lapse denials are overturned once insurers are required to document how and when coverage was terminated.
Behind the Scenes How Lapse Denials Are Actually Resolved
Most lapse disputes are resolved by exposing gaps in notice procedures or payment records rather than litigating intent. Insurers often rely on internal accounting summaries that do not meet legal proof requirements.
Lapse cases commonly resolve through:
• Proof failures regarding lapse or grace period notices
• Evidence showing death occurred during the grace period
• Documentation of payment misapplication or delay
• Enforcement of reinstatement rights
• Litigation establishing continued coverage at death
Once notice defects are identified, insurers often reverse course quickly.
What To Do If Your Life Insurance Claim Was Denied for Lapse
If your life insurance claim was denied due to alleged lapse or nonpayment, time matters.
You should request the complete policy history and payment records, demand copies of all lapse and grace period notices, review correspondence and address records carefully, avoid accepting the denial without legal review, and contact an attorney experienced in lapse disputes promptly.
Strict deadlines apply, and early legal review significantly improves the likelihood of recovery.
For a concise overview of lapse issues and immediate steps, see our Life Insurance Lapse and Nonpayment Fact Sheet.
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Written & Reviewed by Christian Lassen, Esq., Nationally recognized life insurance lawyer: 25 years experience, hundreds of millions recovered. Quoted in The Wall Street Journal ( May 17, 2025).
Last reviewed: Jan 3, 2026 | Contact 800-330-2274
Frequently Asked Questions About Life Insurance Lapse Issues
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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.
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No. In most states, insurers must send a written notice of overdue premiums and warn of pending lapse before terminating coverage.
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The policy may still be enforceable. Beneficiaries can challenge the lapse based on the insurer’s failure to provide required notice.
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Yes. If the insured dies during the grace period, the policy is still considered active, and benefits should be paid.
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Yes. In group life insurance policies, employers sometimes fail to forward premiums properly, leading to wrongful lapse denials.
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Yes. If automatic payment setups fail through no fault of the insured, lapses may be challenged.
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Some policies automatically borrow against cash value to cover missed payments. Failure to apply this correctly can lead to wrongful lapse claims.
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Possibly. Some courts excuse nonpayment if the insured was mentally incapacitated and missed premiums without proper notice.
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No. Reinstatement must occur while the insured is alive, but wrongful lapse denials can still be challenged posthumously.
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Not without following strict notice and grace period rules. Beneficiaries can often challenge technical denials.
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Deadlines vary by state, but it’s critical to act within 1 to 5 years depending on the policy and jurisdiction.
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Not necessarily. Payments mailed within grace periods or accepted by insurers may keep coverage active.
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Bank records, payment receipts, insurer correspondence, and premium notices are key evidence.
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If the insurer used an outdated address despite updated information, lapse denials can often be overturned.
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Possibly. If the insured submitted a reinstatement application before death, it may help challenge a lapse denial.
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In some states, special grace periods and protections applied during COVID-19 emergencies. They can help fight wrongful lapses.
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Only if the insurer followed all legal notice and grace period requirements. Otherwise, beneficiaries may still recover.
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Misapplied premiums can lead to wrongful lapses — and courts often hold insurers accountable for these errors.
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An attorney can obtain records, challenge improper lapses, negotiate settlements, and litigate if necessary to enforce payment.
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The Right Choice for Your Claim
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“After waiting months with no payout, the insurer claimed we hadn’t submitted the right paperwork. The Lassen Law Firm took over, gathered the necessary forms, and pushed the claim through in under three weeks. Efficient and professional from start to finish.”- Michael H.
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