What Happens If You Can’t Pay Your Life Insurance Premium?
- Rikin Shah | Licensed Life & Health Insurance Agent
- Fact-Checked (see our Editorial Guidelines)
- Updated: March 25, 2023
If you’re unable to pay your life insurance premium, the consequences will depend on the type of policy you have. If you have a term life insurance policy, your coverage will lapse if you miss a payment. However, if you have a permanent life insurance policy, you may have options to keep your coverage, such as taking advantage of the grace period, using a waiver of premium rider, using dividends to pay premiums, using the cash value to pay premiums or convert the policy to paid-up status, reducing the policy’s face value, or surrendering the policy. It’s important to reach out to your insurance provider and explore your options if you’re having trouble making premium payments.
What happens if I miss a life insurance premium payment?
If you miss a premium payment on a term life insurance policy, your coverage will lapse. However, if you have a permanent life insurance policy, you have several options to keep your coverage if you’re having trouble making premium payments. You can take advantage of the 30-day grace period, use a waiver of premium rider, use dividends to pay premiums, use the cash value to pay premiums or convert the policy to paid-up status. You can also lower your premium by reducing the policy’s face value or switch from an increasing benefit to a level benefit. If you can no longer afford life insurance, you can surrender your policy, but be aware of the pros and cons of this option. It’s important to stay on top of your premium payments and work with your provider to create a plan to get current if you miss a payment.
Will my life insurance policy be cancelled if I can't pay the premium?
It depends on the type of policy you have and the terms and conditions set forth by the insurance provider. If you have a term life insurance policy, coverage will lapse if you miss a payment. However, if you have a permanent life insurance policy, you may have options to keep your coverage if you’re having trouble making premium payments. These options include taking advantage of the grace period, using a waiver of premium rider, using dividends to pay premiums, using the policy’s cash value to pay premiums or convert to paid-up status, reducing the policy’s face value, or surrendering the policy. It’s important to reach out to your provider and ask about payment options that can help you get back on track if you’re behind on payments.
How long do I have to pay my life insurance premium before it lapses?
Most life insurance companies give policyholders a 30-day grace period from when the premium is due to pay it. Typically, you can go another 30 days without paying, and the policy will be in “lapse pending” status. However, the exact terms and conditions of your policy may vary, so it’s best to check with your insurer to find out how long your policy will remain in force if you don’t make a payment.
Can I reinstate my life insurance policy if I miss a premium payment?
Yes, depending on the type of policy you have and the terms and conditions set forth by your insurance provider, you may be able to reinstate your policy if you miss a premium payment. Some providers offer a 30-day grace period before canceling your policy, and others may offer payment options to help you get back on track. If your policy has lapsed, you can reach out to your provider promptly to ask what you can do to have it reinstated. This process could be as simple as making premium payments to bring the policy current, or a medical examination may be required before your policy can become active again.
What are the consequences of letting my life insurance policy lapse?
The consequences of letting your life insurance policy lapse depend on the type of policy you have. If you have a term life insurance policy and you miss a payment, your coverage will lapse. If you have a permanent life insurance policy, you may have options to keep your coverage, such as using the cash value to pay premiums or reducing the face value of the policy. However, if you do not take action and continue to miss payments, your policy may eventually lapse and you will no longer have coverage. It’s important to work with your insurance provider to explore your options and avoid a lapse in coverage.
Is there a grace period for life insurance premium payments?
Most life insurance companies give policyholders a 30-day grace period from when the premium is due to pay it. Typically, you can go another 30 days without paying, and the policy will be in “lapse pending” status. However, it’s important to check with your insurer to find out how long your policy will remain in force if you don’t make a payment.
Will my beneficiaries still receive a payout if I can't pay my life insurance premium?
If you have a permanent life insurance policy, there are several options to keep your coverage if you’re having trouble making premium payments. You can take advantage of the 30-day grace period and the “lapse pending” status, use a waiver of premium rider, use dividends to pay premiums, use the cash value to pay premiums or convert the policy to paid-up status. If you have a term life insurance policy, your coverage will lapse if you miss a payment. However, some insurance providers offer payment options to help you get back on track and reinstate your policy. It’s important to work with your provider to create a plan to get current and avoid cancellation.
Can I change the payment schedule of my life insurance premium?
Yes, you may be able to change the payment schedule of your life insurance premium. Depending on your policy and insurance provider, you may be able to switch from monthly to quarterly, semi-annually, or annually. However, keep in mind that some insurance companies may charge additional fees for processing frequent payments, so it’s important to weigh the costs and benefits of each payment schedule option. Additionally, if you’re experiencing financial hardship and are having trouble making premium payments, there may be other options available to you to keep your coverage in place.
What happens if I cancel my life insurance policy before the end of the term?
If you cancel your life insurance policy before the end of the term, you may not receive any benefits or refunds. It’s important to review the terms and conditions of your policy and speak with your insurance provider to understand the potential consequences of canceling your policy. Additionally, if you have a permanent life insurance policy, there may be options to keep your coverage if you’re having trouble making premium payments.
Can I borrow from my life insurance policy to pay the premium?
Yes, you may be able to use the cash value of your permanent life insurance policy to pay your premiums. However, it’s important to note that borrowing from your policy will reduce the death benefit and may also incur interest charges. It’s best to discuss your options with a financial advisor or insurance agent before making any decisions.
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