Sometimes bills get lost or misplaced and next thing you know, you have missed a payment. When it comes to life insurance it’s extra important not to miss payments, because if you do your policy could lapse.
A lapsed life insurance policy means that your beneficiaries are no longer entitled to the death benefits outlined in the policy. Without a life insurance policy, you may be leaving your loved ones open to financial struggles once you pass away.
If you are a little late on one payment, don’t stress too much, as most life insurance companies have a 30 to 31 day grace period. This allows you to be late on your premium payment without disruption to your policy. However, if your payment is later than 31 days or doesn’t come at all, you could lose the policy entirely.
If you’d like to keep the same policy but it has lapsed, you typically have to contact the life insurance company and apply for reinstatement. If your health has changed in any way since you purchased the life insurance policy, you must indicate this information and your premium rates could go up or you could be denied coverage completely. If you have a high-risk condition or disease, it’s extremely important to not let your policy lapse, because you are not guaranteed coverage once it’s gone.
It’s important to make sure you are purchasing a policy you can afford. Don’t let the life insurance rates be a bill that you struggle to pay each month or year. Use a life insurance calculator to determine exactly how much coverage you need, and purchase only that amount.
Once your life insurance policy is purchased and it’s time to start making premium payments, select a payment schedule you are comfortable with. You can typically make payments annually or monthly. Many life insurance companies also offer auto-pay options, so that the payment comes out of your account automatically. If you often miss payment deadlines, an auto-pay schedule may be the right choice for you.
Do your best to stay organized and keep all your life insurance information in one place or folder. Being aware of what is expected of you and when payments are due will help you avoid a lapsed policy in the long run.