According to the Life Insurance Marketing and Research Association (LIMRA), 44% of American households would find themselves with significant financial difficulties within six months if they lost the main wage earner in their family. This emphasizes the importance of ensuring life insurance policies are up-to-date. Would you know what to do if your life insurance plan lapsed? Let’s walk through what happens when a life insurance policy lapses and explore your options to manage policies.
Factor in the Grace Period
The first factor to consider, if you realize you have missed a premium payment, is that most insurance companies have a grace period. This is great news for a policyholder. This grace period typically lasts 30-31 days from the day that the last premium is due. The life insurance policy still covers your family during this time, meaning your beneficiaries would still receive a payout in the event of your death. Simply make a premium payment during this period and coverage will continue.
Once you surpass this grace period, designated by your insurance company, the policy is considered to be lapsed. A fully lapsed policy indicates coverage is no longer available, meaning the death benefit no longer applies. The goal for the policyholder is to try to keep a policy active or to renew the policy during the grace period to maintain seamless coverage.
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How to Find a Lost Policy
What happens if your policy is missing? In some cases, life insurance policy details are lost. Whether your circumstances have changed or you’ve paid this policy annually and haven’t accessed payment details in some time, misplaced policies can lead to challenges and the potential risk of coverage lapsing. Here are a few steps you can take to try to find your policy:
- Search digital and paper records
- Search your state’s unclaimed property database
- Check with old employer records
To get the full list of additional ways to find a lost life insurance policy, visit this blog: Lost Life Insurance Policy? Next Steps to Get It Back
How to Reinstate a Life Insurance Policy
Reinstating a life insurance policy can add a few extra steps, but is attainable. Most insurance companies allow policies to be reinstated for three to five years after lapsing. Some may require a renewed application and medical record evaluation. If your health has declined, you could risk losing coverage. The last thing to consider if reinstating after a lapsed policy is additional fees based on past due premiums. These are all good items to consider before reinstating a policy.
How to Prevent a Life Insurance Lapse
What can you do to prevent a life insurance policy lapse? There are a few steps you can take to prevent this from happening to you in the future. First, try setting up automatic payments. This ensures your premiums will be paid and coverage will stay intact. Second, if you typically pay premiums annually, consider switching to monthly. This keeps premium payments top-of-mind and log-in information easily accessible.
Additionally, an old-fashioned calendar reminder can go a long way. Take a minute to set a recurring reminder that a payment is coming up. Lastly, double-check your email and text notification settings from your insurance provider. Ensure alerts can reach you notifying you of policy lapse or premium-due notifications.
Keeping tabs on your life insurance policy ensures complete coverage for your family and gives you peace of mind. For more information about life insurance policies, take a look at our life insurance section on the blog: Life Insurance
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