In order to ensure that your life insurance policy is active, and the benefits will be paid out upon your passing, one of the most important things you need to do is continue to pay your premiums. If you fail to pay your premiums, your policy could lapse, and your loved ones might receive nothing. Our life insurance attorneys just resolved a $429,000.00 Global Atlantic Life Insurance claim.
What Happens When a Life Insurance Policy Lapses?
When a life insurance policy lapses because a premium wasn't paid, the policy is essentially terminated. If there's no active policy at the time of the insured's death, there will be no payout. If you have a life insurance lapse or a life insurance delay or life insurance denial, we can help.
There's Usually A Grace Period regarding a Life Insurance Claim
Most policies have a grace period. This means that if you fail to pay your premium on the due date, the policy shouldn't be terminated right away. You will be given a certain number of days to make the late payment, and if you do so within that set time period, your policy will remain in force. A typical grace period is 30 days.
Laws Regarding Payment Lapses & Life Insurance Claims
Over the years, laws have been introduced regarding how life insurance companies must act when payments are missed. There are strict procedures the company must follow when they are considering initiating a policy lapse as a result of non-payment. The laws change and also vary by state, but generally, all companies must do the following:
- Send bills and notices to the insured
If an insured misses a payment because the insurance company failed to send out a bill, the missed premium may actually be the insurance company's fault. If a payout is denied and a beneficiary then appeals the denial, the insurance company bears the burden of proving that they sent out timely bills and notices to the insured.
- Inform the insured about missed payments and a possible lapse
After missed payments, the insurance company is required to inform the insured that they have missed payments and the policy is about to lapse. They cannot just cancel the policy without notice.
New Life Insurance Claim Rules Covid-19
As a result of the pandemic, new payment rules were enacted for many life insurance policies. States enacted emergency regulations to help provide relief to policyholders who might be struggling to pay life insurance policy premiums due to Covid-19. The most notable action most companies took was to extend grace periods, allowing policyholders to make late payments without their policy lapsing. Most companies extended their grace periods to 90 days. In some circumstances, the beneficiary of someone whose policy lapsed during Covid might actually be able to collect the benefits still. This is a complicated time, and each policy is different, so it's a good idea to contact an experienced attorney to discuss this matter.
How To Reinstate A Lapsed Policy
In most cases, if a life insurance policy lapses, the insured will have a certain amount of time in which to reinstate their policy. If you realize your policy lapsed and it was a mistake, you can usually get your policy reinstated within 15-30 days without any significant issues. However, if you wait longer, there are many more requirements you might have to meet to reinstate your policy. For example, you probably have to submit a reinstatement application, fill out a questionnaire regarding your health, and attest that your health condition hasn't changed since your policy was first approved. Handling any lapsed policy quickly will make it much simpler to reinstate the policy.