Mike’s Life Insurance Advice

Hi Tony,

First, I hope things turn around for you.  But to answer your question, the bottom line is in order to maintain our coverage we must, of course, pay for our policies.  In a moment we’ll take a look at possible ways to deal with the situation. But first, let’s take a look at the process.

If you miss paying any premiums your insurer will contact you and advise you that they haven’t received your payment because it could be a banking error or an oversight on your part.

They’ll inform you that unless you pay your premium within your grace period  that your policy will automatically be cancelled.

The “Easiest” Answer – Pay Your Premium within the Grace Period

Most companies offer a thirty to thirty-one day grace period within which you can make your payment and not suffer any negative consequences whatsoever.  Even if you die within this grace period your beneficiaries will collect the death benefits.  The company will just deduct any premium that’s due.

However, if the grace period ends and you still haven’t made your premium payment your life insurance policy will lapse.

Some life insurance companies allow you to reinstate your lapsed policy within a certain timeframe.  But you will need to prove that you’re insurable, you’ll have to repay any outstanding loans you might have against your policy, and also pay all your overdue premiums and the interest that has accrued.

Even if they reinstate you your premium will probably be higher because you will be older.  In addition, if your health has substantially deteriorated your premium can be a lot higher.  And if your health situation is extreme you might be uninsurable.

A Possible Solution – Have Your Payment Withdrawn From Your Cash Value

You may be able to protect yourself against your policy lapsing if you own a cash value policy.

Just authorize your insurance company to withdraw the premiums from your insurance policy’s cash value if you miss any payments.  Of course this only keeps your policy active until your cash value runs out.

An Additional Solution – Protect Yourself When You Buy Your Life Insurance Policy

If you want to prevent the possibility of losing your life insurance coverage you might be able to add a “Waiver of Premium” option to your policy.  When you have this waiver, if you become unemployed or cannot work temporarily because of an accident or illness your insurer will take over the payments until you return to work (after you’ve contacted them to tell them what has happened).

Again, I hope you never need to use this information.

Best of luck,
Mike