What Happens When You Miss A Life Insurance Payment?

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What Happens When You Miss A Life Insurance Payment?

Written by Caitlin Wood

What Happens When You Miss A Life Insurance Payment?

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Life Insurance Missing Payments

You’ve probably got plenty of bills that come due every month, including life insurance premiums. And like all other debts and insurance policies, making timely payments every billing period is important to keep your credit health in good standing and to avoid any interruptions in service or coverage.

When it comes to life insurance, you want to make sure that your loved ones will always be protected if you pass away earlier in life. But if you miss a premium payment, will that leave your beneficiaries vulnerable? What will happen if you miss a life insurance payment?

In this article, we’ll answer that question and offer suggestions on how to avoid missing life insurance premium payments so that there will be no lapse in coverage. 

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Missing One Life Insurance Payment

Thankfully, missing one life insurance payment won’t necessarily mean that your policy is no longer in effect. Most life insurance policies offer a grace period, which is the amount of time you have to make a payment and bring your policy back to good standing. Depending on your policy and your insurance provider, this period usually starts after the payment due date and only lasts for a short amount of time.

During the grace period, your life insurance policy will still be in effect. That means your beneficiaries will still receive the death benefit if you pass away during that period. That said, the premium payment that you owe would likely be deducted from the death benefit payout amount.

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If you don’t make up for the missed payment during the grace period and your policy lapses, you won’t be covered. But you might still be able to have your policy reinstated, depending on the amount of time that has passed since it lapsed. 

If you missed a payment on a permanent or whole life insurance policy, you may be able to use part of the cash value of the policy to put towards your premiums. Your policy may also pay out dividends, in which case you can use them to offset your premium payments. 

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Missing More Than One Missed Payment

If you miss more than one premium payment and your grace period has elapsed, your policy will no longer be in force. That means you will have to take steps to get your policy reinstated or will have to apply for a new policy if you still want to be covered.  

Every insurance company has different guidelines when it comes to how the reinstatement process works. That said, the majority of term life insurance providers allow reinstatement applications to take place as much as 5 years from when the grace period expired.

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What To Do When You Miss a Payment

If you missed a life insurance premium payment, you should do what you can to make up for it right away before the grace period elapses. Call your insurance provider immediately and explain your situation and request advice on what you can do to bring your policy back up to good standing. 

If you missed a payment because you don’t have the financial means to cover the premium due, ask your insurance agent if there are any options you can take advantage of to reduce your premium amounts and make them more affordable.

How Long Is The Life Insurance Grace Period? 

Generally speaking, grace periods are approximately 30 days long. Read your policy contract’s fine print or speak with your insurance agent to find out exactly how long your grace period is. 

Once the grace period is over, your policy will no longer be active and you won’t be covered. 

Can You Reinstate A Lapsed Life Insurance Policy? 

If you are still unable to make up for the missed payment within the grace period and your policy lapses, you might still be able to reinstate your policy, depending on your life insurance provider and your contract. Each insurance company has its own regulations regarding lapsed policies and missed premium payments, so you will need to get in touch with your agency to find out whether or not your insurance policy can be reinstated.

With some insurance providers, all that is required is the completion of a reinstatement application and payment of the missed premium. With others, you might have to start the process over again with a medical exam so your insurer can make sure that your health condition is the same as what it was when you first bought the policy.

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Keep in mind that there is only so much time that you have after a missed premium payment to have your policy reinstated. This time frame may be stipulated in your contract, so go over your policy carefully to find out what that is. 

If your insurance provider agrees to reinstate your life insurance policy, you’ll be required to pay all of your missed payments. You might even be charged interest on premiums that are past due. 

Most insurance companies are willing to work with their clients to catch up on missed payments, so give your agency a call to see what can be worked out.

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Reinstating Your Policy vs. Taking Out A New One

While you may have the option to apply for a new policy, you may be better off trying to have your current lapsed policy reinstated, as it will probably cost you less. If your health is still the same as it was when you first applied, your insurance provider may leave the original pricing on your policy as is.

The premium on your current policy will still be based on how old you were when you first took out the policy, even if your health has changed since then. If you apply for a new policy, the price will be based on your current age. And since age plays a role in the cost of life insurance, you’ll probably pay a lot more. 

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Tips To Avoid Missing Life Insurance Payments

To make sure that you never miss a life insurance premium payment, consider the following tips:

  • Automate your payments. Consider setting up automatic payments so that you never have to remember to make your payments manually. Forgetting to make a payment won’t be an issue since your payments will be automatically made and deducted from your bank account every billing cycle. 
  • Raise your deductible. If the cost of your premiums is an issue, consider increasing your deductible amount, which will reduce your premiums. 
  • Reduce your benefit. You can make your premiums more affordable by reducing the death benefit on your policy. Just make sure that the death benefit will still be adequate enough to provide sufficient coverage for your loved ones. Keep in mind that you won’t be able to increase the benefit at a later time. 

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  • Pay your premiums annually. Instead of making monthly payments towards your life insurance policy, consider making annual contributions. Not only will this help you avoid having to make more frequent payments, but it can also slightly reduce what you owe, as your insurance provider might charge you slightly more for a monthly payment schedule.
  • Tap into your cash value to cover premiums. If you have a permanent life insurance policy that comes with a cash value portion, you can withdraw some of that money to cover your premiums. Just keep in mind that withdrawing from your policy’s cash value will reduce the death benefit paid out to your beneficiaries.
  • Cut back on riders. If you have a few add-on features to your policy, you could be paying more than you need to. Consider dropping some riders on your policy in favour of a more affordable policy and lower premiums.

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Final Thoughts

Missing a life insurance premium payment is not ideal, but it doesn’t necessarily mean that you won’t be covered. As long as you make up for that missed payment within a certain period of time, you can bring your policy back up to good standing. You will continue to enjoy peace of mind knowing that your loved ones will be financially compensated when you pass away. If you do miss a payment, take immediate steps to make up for it, and consider adopting ways to help you avoid missing further payments in the future.


Rating of 5/5 based on 2 votes.

Caitlin is one of Canada's leading personal finance writers. She is a graduate of Dawson College and Concordia University. She has been part of the Loans Canada team for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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