What To Do When Your Life Insurance Policy Lapses

Posted on February 29, 2016 and updated December 5, 2018 in Life Insurance Canada News, Life Insurance FAQ 4 min read
life insurance policy lapsed what to do

What happens to your life insurance coverage if your policy lapses? Will your insurance company be responsible for paying the death benefit on the insured’s life if they suddenly pass away?

Don’t bank on it. If you’ve missed the premium payments for your life insurance policy, and haven’t made the missed premium up within a 30-day grace period, your insurance policy will terminate and will no longer provide any insurance coverage or benefits.

The 30-Day Grace Period

The Grace Period is the duration of time in which the policy owner is able to pay up any outstanding premium dues, without losing their insurance coverage. The Grace Period is typically 30 days.

However, if you’ve not made up the premium in that period of time and the insured person dies, despite missing out on the payment, the person will still receive a death benefit. Once the grace period ends, and the remaining premiums are not cleared, your life insurance policy will likewise, lapse.

Reinstate Your Policy

The good news is that if your policy lapses, you have the option of reinstating it or in simpler words, bringing it back to life. Once your policy is terminated after the grace period, reinstatement brings it back to an active or a functional status.

Insurance companies have different rules and regulations for policy reinstatement but with most companies, to reinstate your old policy you’ll have to pay the outstanding premium dues and may have to profide proof of insurability. . The sooner you consider restoring your lapsed policy the better, as your future insurability is never guaranteed.

The best case scenrio is to avoid reinstatement altogether by paying up your missed premium within the 30 day grace period, so that you won’t have to go through any new underwriting.

Consider Replacing The Coverage

To avoid this hassle, some people consider buying a new insurance policy instead of reinstating the previous one. In some cases policyholders may not be aware that it may be a better option to put their lapsed policy back in force instead of buying a new one, as it is could be cheaper. In other cases, it makes more sense to re-enter the market and purchase a new policy. If you are intrested in purchasing a new policy you can choose a life insurance plan for seniors over 85. Reinstating old policies can be a real hassle and you can always buy a new one.  

Update Your Carrier If Your Mailing Address Changes

Always take the necessary precautions by paying your premiums on time. Also, ensure that your insurance company has your current mailing address on file. Life insurance policies are long-term contracts and it’s easy to forget to inform your carrier when you move. If they are sending out premium notices to an old address you may not know that your policy is about to lapse.

You can keep yourself well informed regarding the status of your policy and avoid it from lapsing if you are receiving all notices and keeping in touch with your agent on a yearly basis.

Take a Premium Holiday If You Can Afford It

It’s worth noting, you can can avoid a universal life insurance policy from lapsing the policy’s accumulated account value. This value, which is deposited to the policyholder’s account, keeps increasing over time, whenever a premium payment is made. Hence, they can use that account value to pay off the missed premiums and prevent the policy from lapsing.

Always remember, lapsing is the last thing you would want to happen to your policy! Therefore, never miss out on your policy premium dues or beware of the risks of policy reinstatement and replacement.
 

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Samantha McFarlane
Samantha McFarlane

Hi just wanted to know what happens if your policy lapses years ago address changed only received letter from old address years ago about it being lapse and still taking money for coverage could u still get your money back or how does that work.I’m so confused to know if they are taking no ey from me while my policy has lapsed

LSM Insurance
LSM Insurance

My suggestion would be check with the insurance company and get something in writing.