Life Insurance Lapse & Nonpayment Issues Fact Sheet
Christian Lassen, Esq. | Quoted in The Wall Street Journal | 25 Years Experience Helping beneficiaries nationwide challenge wrongful lapse and nonpayment denials.
What Is a Lapsed Life Insurance Policy
A lapsed life insurance policy is one the insurer claims is no longer in effect due to nonpayment of premiums. However, insurers must meet strict legal requirements before coverage can be terminated.
Most policies include notice requirements, grace periods, and reinstatement provisions. Failure to follow these rules can make a lapse invalid.
Why Policies Are Declared Lapsed
Life insurance policies are often declared lapsed due to administrative or payment handling problems rather than intentional nonpayment.
Common causes include:
• Missed payments without proper notice
• Failure to send grace period warnings
• Employer errors in group policies
• Bank draft failures
• Misapplied payments
• Notices sent to wrong addresses
• Incapacity during payment periods
• Automatic premium loan confusion
• Death during grace period
• Reinstatement processing errors
Immediate Steps After a Lapse Denial
Request payment history and policy documents
- Ask for copies of all lapse notices
- Confirm grace period terms
- Keep copies of all correspondence
- Be mindful of deadlines
Legal Principles to Know
• Insurers must prove proper notice
• Grace periods must be honored
• Administrative errors can invalidate lapses
• Wrongful lapse denials can be challenged
Frequently Asked Questions
What if no notice was sent
The policy may still be enforceable.
Is coverage active during the grace period
Yes. Insurers must honor coverage during this time.
What if a bank or employer caused the missed payment
Denials caused by third party errors can often be challenged.
Is legal representation important
Yes. Lapse disputes involve technical notice and payment rules.
Key Takeaways
• Lapse denials are frequently based on notice failures
• Many nonpayment denials are wrongful
• Beneficiaries have enforceable legal rights
• Prompt action improves outcomes
For legal representation and detailed guidance, see our main page on Life Insurance Lapse and Nonpayment Issues or contact our office for a free consultation.
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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
Our FAQ
Have questions? We are here to help. Still have questions or can't find the answer you need? Give us a call at 800-330-2274 today!
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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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“We were denied after my dad changed jobs and the company claimed he never converted his life insurance policy. Mr. Lassen found the paperwork showing he had. The check arrived a month later.”- Brian C.
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