SATURDAY, MAY 30, 2020
Life insurance can lapse for many reasons. Whether you forget a payment or can’t afford your premium, there are a few ways to respond regardless of the cause. Quick action is the best way to restore your coverage and move forward after a lapse in life insurance.
What Causes Life Insurance to Lapse?
The main reason that a life insurance policy lapses is due to a lack of payment. Since most people pay for their life insurance policies annually, it’s not hard to forget to send in payments for a year or more. Therefore, many people today choose monthly or quarterly premium payments instead. If your information isn’t kept updated and the insurance company can’t contact you, they may also cancel the policy even if you make payments. Update your address and phone number regularly to make sure they can always reach you.
What Can You Do to Restore Your Coverage?
The actions you can take for a lapsed policy depend on the amount of time that passes before you notice the problem. If you get a notification of non-payment or notice on your own within the first 30 to 60 days, you can likely pay with a late fee and continue your policy. It’s harder to reinstate a policy that lapses due to non-payment for many months or years. You’ll usually start a new policy instead, which means paying premiums at a rate determined by your current age and health status.
How Can You Prevent Lapses in Life Insurance Coverage?
Just like with auto and home insurance, life insurance works best when you set up the premiums for auto-deduction from your bank account. The insurance company always receives its payment, keeping your policy in good standing until it’s needed. Keep your contact information updated with both your bank and insurance company so they can contact you if there’s a problem and a payment doesn’t complete.
With these tips, you can keep your life insurance rates locked in and enjoy the peace of mind that comes from uninterrupted coverage. Don't wait for a letter warning you that the policy is about to lapse when you can take an active role in keeping it maintained. Life insurance policies tend to last for decades, so start a routine of checking on them now to prepare for the rest of your life.
ALSO READ: How to Buy Life Insurance for the First Time
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