If you find yourself here, it means you are skeptical of what the future holds if you stop paying your insurance premium. Before we dive right into it, let’s take a look at this brief scenario.
Mr. John holds an insurance policy with X Insurance Company. Mr. John last paid his premium two years ago, and he perished in the third year as a consequence of a horrific car accident. A few days later, his family receives a call from the insurance company alerting them that Mr. John has a policy and that they should come to collect their lump payment.
Mr. James is insured with X Insurance Company. Mr. James last paid his premium two months ago, and five months later he became unwell, necessitating surgery. While the family obtains funds for surgery, Mr. James‘ wife realizes that he has an insurance policy and decides to contact the firm, only to learn that she will not receive any money because Mr. James stopped paying his premiums.
Let’s examine what happens when you stop paying your life insurance premiums, keeping these possibilities above in mind.
Depending on the terms and circumstances of your policy, not paying on time may have major repercussions. Keep reading to find out what happens if you miss one or more life insurance premium payments.
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Insurance Premium – What Happens If I Stop Paying?
In order to properly discuss this, an answer to the following questions will clarify and put all doubts to rest.
1 How Do Life Insurance Premium Works?
Premium payments may be made monthly, quarterly, semi-annually, or annually, depending on the terms of your life insurance policy. Because of their frequency and modest quantity, monthly or quarterly payments are often easier to budget for. However, some insurance companies charge additional fees to handle these frequent payments. This may end up costing you more in the long run.
Paying premiums semi-annually or annually will assist in minimizing extra fees, but will necessitate a hefty lump-sum payment. If your resources are tight, make every attempt to free up cash for premium payments. This is regardless of the premium payment arrangement.
2 Does Your Policy Lapse If You Miss Payment?
First and foremost, what exactly is a policy lapse? A policy lapse occurs when you are no longer able to take advantage of the benefits and coverage provided by the insurance. Once your insurance has expired, you will no longer be able to use its features or register a claim against it.
If you fail to pay your premium on time, your policy may expire, depending on the type of coverage and the terms set by the insurance provider. If you fail to make a term insurance payment, your coverage will undoubtedly lapse.
A missing payment on your permanent life insurance policy may not cause your policy to lapse. If you stop paying premiums, you have three options: cash out the policy, accept a reduced sum of coverage that no longer accrues cash value, or switch to term coverage.
Please contact your insurance provider to learn more about your alternatives. Also, keep in mind that many insurance providers offer a 30-day grace period before your policy expires, and in most situations, you will be contacted.
3 How To Avoid The Loss Of An Insurance Policy
There are several methods for ensuring that your insurance premium is paid on time. Rather than a lack of funds, insurance plans commonly lapse due to forgetfulness. Here are some pointers to help you stay on track.
- Enrolling in autopay through your insurance provider or using your financial institution’s bill payment program.
- Make your premium payments at the beginning of the month, several days before the due date, to ensure prompt processing.
- To better prepare for big annual or semi-annual payments, you should consider setting up an automated transfer to another savings account.
- Set up premium payment reminders.
4 What Can You Do If Your Policy Has Expired?
The majority of insurance companies have a revival period during which a lapsed policy can be reinstated. And the reinstatement procedure is as follows:
Check the revival period: Determine whether your policy is still covered by the revival period. Most insurance companies offer coverage for two to three years.
Application: In order to reinstate a lapsed policy, the policyholder must submit an application to the insurance company.
Due payment and penalty: To be able to revive a policy, all past-due premiums for all years since the policy’s lapse must be paid, as well as any penalties imposed by the insurance company for non-payment of premiums.
Medical Checkup: In some cases, a medical examination at the designated medical center is required. In some cases, the revival may necessitate a declaration of good health.
Updated Terms and Conditions: Because a reinstated policy is equivalent to a new one, the insurance company may impose new terms and conditions. This must be noted by the policyholder by reviewing the new policy documents.
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