What Happens If You Stop Paying Life Insurance Premiums?
Life insurance policies require regular premium payments to remain active. Failing to pay these premiums can result in your policy lapsing or being canceled by the insurance company. The consequences of missed payments will vary depending on the type of policy and the terms and conditions set forth by the insurance provider.
Payment Options
Premium payments may be due monthly, quarterly, semi-annually, or annually. Opting to pay premiums on a semi-annual or annual basis can help you avoid any added costs, but it’ll mean making a large and infrequent lump-sum payment. Some providers offer a non-forfeiture option that allows you to stop paying altogether. You have to agree to a smaller death benefit in exchange, and the policy will no longer build up cash value.
| Policy Type | Consequences of Missed Payments |
|---|---|
| Term Life Insurance Policy | Expect coverage to lapse if you miss a payment. |
| Permanent Life Insurance Policy | May not automatically lapse from a missed payment. You can cash out the policy, agree to a reduced death benefit, or convert to term coverage if you stop paying premiums. |
Reinstating Lapsed Policies
If your policy lapses, start taking the necessary steps to get your coverage reinstated right away. Non-payment can result in your policy being canceled by your insurance. Some insurance providers give you up to five years to get current on your premium payments plus any applicable interest, but a medical examination may be required before your policy can become active again.
Staying on Top of Premium Payments
Stay on top of your premium payments by enrolling in autopay through your insurance provider or using your financial institution’s bill payment service. If these methods don’t work for you, schedule your premium payments at the beginning of the month several days before the due date to ensure timely processing. To better prepare for large annual or semi-annual payments, you might consider setting up an automatic transfer to another savings account to be prepared when the time comes.
It’s not the end of the world if you miss a life insurance premium payment. If this happens to you, work with your provider to create a plan to get current. And if your policy lapses, start taking the necessary steps to get your coverage reinstated right away.
