Life insurance coverage has many requirements to make it valid at the time of the insured's death. The most important of which is its premiums being up-to-date. When policyholders miss their premium payments or fail to follow through on reinstatement before the covered party dies, it's likely the insurer will use this fact as their reason for denying your benefits. This means a substantial loss in hard-earned premium money paid for decades.
Lapses occur when policyholders fail to make a payment on time by the due date or within the grace period outlined in the insurer's coverage policy. Many insurance companies will send out a warning letter of the impending cancelation of coverage and encourage you to make your payment right away. Failing to do this means your life insurance policy has lapsed and is no longer active. This means the carrier doesn't have the legal responsibility to pay any death benefit claims for that coverage.
Most life insurance companies have a grace period provision within the policy itself, allowing anywhere from 31 to 60 days to make a late payment. This can vary depending on the insurer you bought the policy from and the laws of your state. Should the insured pass away during the grace period, any death benefit claim made should be paid. If this happens outside this window, it will likely be denied by your insurance provider.
Keep in mind that different states have different exceptions to this general rule regarding lapsed policies when it comes to when a grace period begins and ends. Again, a knowledgeable life insurance attorney is your best resource for evaluating your situation and determining if this might apply to your case.
Typically, when an employee is terminated or retires from their company, they should be able to convert or port their policy. This option applies to ERISA-governed group life insurance policies. If your coverage doesn't fall into this category, failing to continue making your premium payments after exiting your employer can mean a lapse and loss of coverage.
As a beneficiary of a life insurance policy, you do have rights should the policyholder experience a lapse. There are potential avenues to resolve this stressful situation, and speaking with an experienced life insurance lawyer to determine your next steps to reinstate coverage or appeal a denial of death benefits is crucial. It could just be a mistake, or there may be laws in your state that offer you more protection as a beneficiary.
If you need an aggressive life insurance attorney to help you straighten out a lapsed policy situation with your insurer, contact our life insurance lawyers right away. We are available 24/7 to take your free consultation request.