Lapse

In regards to life insurance, do you know what lapse means? Life insurance should never be something that you forget about, and there are rules that must be followed. If you want life insurance to pay off for your family when you pass away, you are going to have to give your policy the respect that it deserves. If you do not show it this respect, you could run the risk of having your life insurance policy lapse. That is why it is important to know what lapse means and how it comes about. You need to be the one in control of your life insurance policy and know all the possible lapsed policy options, so start right now!

How a Policy Becomes Lapse

As long as you continue to pay your premiums every month, your policy will remain in force. If you miss a premium payment you have 30 to 31 days to catch up on payments. This is called the grace period. If this grace period goes by and you have not made a payment, your policy will go into lapse. This means that your policy will cancel itself. If you are not going to pay for it, you should not be able to use it. If you have cash value, this account will continue to pay your premiums until it runs out. That is when the grace period will begin. If you do not pay attention, you run the risk of a lapse negating your life insurance policy.

The Consequences of a Lapse

Some people choose to let their policy lapse, because they cannot pay for it. There are two schools of thought on letting a policy lapse on purpose. Some life insurance companies do not even check to see if you have had life insurance before. This is why people say that there is no real consequence of lapsing your life insurance on purpose. Unfortunately there are some life insurance companies who want to see how many lapses you have suffered. If you lapse too many times, you can get denied life insurance. They want to make sure that their business is given to those who can handle it. This is why you need to pay attention and pay your insurance premiums at all times. There is no reason to risk it.

Reinstatement of a Lapsed Policy

Yes, it is possible for you to reinstate your lapsed life insurance policy. Each company will deal with this a different way so make sure you ask them directly. Generally you will have to pay back all the premiums that you have missed, and you will have to reinstate your policy within 5 years of letting it lapse. There is a problem however. If you are now uninsurable, reinstatement might become very difficult, or not even possible. Also, if you surrender the policy for cash value, reinstatement cannot happen. You never know when your policy can be lapsed. Different amount of cash value can sustain your policy without your knowledge. Check out all of your policy information before you look to reinstatement.