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Many Americans are struggling to pay bills as inflation is eating more out of people’s paychecks. If forced to decide whether to pay for groceries or, say, a life insurance premium, the choice is pretty clear.
That’s not to say life insurance isn’t important. In fact, now is not the time to be without a financial safety net for your loved ones if something happened to you and you were no longer around to support them. So if you’ve lost your coverage—or are afraid you will—because you haven’t been paying premiums, you can get your coverage back if you take the right steps.
Here’s what you need to know about reinstating a life insurance policy that you let lapse.
What Happens If You Miss a Life Insurance Payment
Fortunately, missing one life insurance payment won’t result in losing your policy. Life insurance companies typically offer policyholders a 30- or 31-day grace period to pay premiums from the date they are due, says Erin Ardleigh, founder and president of Dynama Insurance, an independent insurance brokerage firm.
A policy is still in force during the grace period. If you were to die during that period, your beneficiaries still would get a payout. However, the insurance company would likely subtract the premium payment owed from the death benefit, Ardleigh says.
If you’ve missed a payment, Ardleigh recommends calling your insurer to pay what you owe by phone or logging onto your account to make a payment online. This will be the fastest way to fix the problem. If you can’t afford to pay insurance premiums now, discuss your payment options with your insurer.
How Long Can You Go Without Paying?
Although the length of grace periods are pretty standard, the amount of time you can actually go without paying premiums—and not lose your coverage forever—depends on the type of life insurance.
If you don’t make a payment on a term life insurance policy during the grace period, your policy will lapse. That means your policy will no longer be in force.
If you have a permanent life insurance policy, such as a whole life insurance policy, you might be able to go longer without making payments. If your policy has cash value built up, you could use it to cover premium payments. If you have a whole life policy, you might also be receiving dividends that could be used to offset premiums. Talk to your insurance company about whether these options are available to you and what impact they’ll have on your policy.
What Happens When Life Insurance Lapses
Once a policy has lapsed, you no longer have coverage. That means the insurer does not have to pay a death benefit to your beneficiaries if you die.
But you may be able to reinstate a lapsed policy, depending on how long ago it lapsed. In fact, many companies will give you a 15- to 30-day buffer after a policy lapses to reinstate it without having to jump through any hoops. You’ll likely just have to pay the premiums you missed, Ardleigh says.
The sooner you act to reinstate a lapsed policy the better. If you wait, the process of getting your coverage back can be more involved. If you wait too long, you might not be denied coverage.
How to Reinstate a Lapsed Policy
Insurers typically allow three to five years to reinstate a policy after it lapses, Ardleigh says. However, they have certain requirements for reinstatement.
At a minimum, you’ll have to submit a reinstatement application, fill out a questionnaire about your health and attest that your health condition hasn’t changed since your policy was approved.
“It’s really important to be honest with them,” Ardleigh says. “If you lie, it could void your policy at death. Insurance companies don’t have to pay a claim if they can prove there’s a material misrepresentation you’ve made.”
Your insurer also might check your medical records from your doctor and require you to take a life insurance medical exam—as you may have done when you first applied for coverage. If your health has changed for the worse, the insurance company might not reinstate your policy.
If the insurer agrees to reinstate the policy, you will have to pay all of the premiums owed. Insurers also can charge interest on past due premiums. Ardleigh says a rate of 6% is common.
Benefits of Reinstatement
The benefit of reinstating an existing policy rather than applying for a new policy is that you’ll likely pay less. If your health hasn’t changed, your insurer will honor the original pricing on your policy, Ardleigh says.
If your health has changed, that could affect your rate (or your insurability). But your age won’t be a factor because the premium still will be based on the age you were when you first applied for coverage.
You wouldn’t get this preferential treatment if you were to apply for coverage with another insurer. Your rate would be based on your current age. Rates can go up 6% every year you are older, Ardleigh says. So if it’s been several years since you first got coverage, you could be looking at a much higher premium.
Ask your insurer to calculate how much you owe in interest and past payments. Then shop around for a new policy to compare prices. You might find you’d be better off getting a new policy.
What to Do If You’re the Beneficiary of a Lapsed Policy
Unfortunately, if you’re the beneficiary of a lapsed insurance policy, you likely won’t receive a payout when the insured dies. You’d be in luck if the insured died during the grace period. But you couldn’t reinstate a lapsed policy to get a death benefit after the insured’s death.
That said, it is always worth calling the insurance company and asking if it would let you pay the back premiums and file a claim, Ardleigh says.
How to Prevent a Life Insurance Lapse
Ideally, you don’t want to get to the point where your policy has lapsed. Take these steps if you’re having trouble making your payments.
Set up automatic payments
Reduce the risk of forgetting to make a payment (or not getting statements in the mail) by having your premium deducted automatically.
You might be paying extra for life insurance riders that provide additional coverage that you don’t need to have. Asking your insurer to remove those riders might make your premium more affordable.
Take advantage of flexible premiums
If you have a universal life insurance policy, you might have the flexibility to adjust premium amounts.
Use cash value or dividends to cover premiums
The cash value in a permanent life insurance policy can be used to cover premiums temporarily. Dividends paid on whole life policies also can be used to offset premiums.
Switch from annual to monthly premium payments
If you have a large annual payment due, ask if you can switch to monthly payments to spread out what you owe.
Consider reducing your death benefit
You can lower your premium if your policy allows you to reduce the death benefit. You won’t be able to increase your benefit later. But at least you’ll have some coverage rather than none.
The key is to communicate with your insurance agent or insurance company to explore your options if you’re having trouble paying premiums or have a policy that has lapsed. Don’t assume that your only choice is to give up your coverage.
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How do I reinstate my life insurance? ›
During the grace period, you can reinstate your life insurance policy simply by paying the outstanding premium and any associated late fees. Grace periods typically last around 30 days, depending on your policy. Under certain circumstances, some insurers may extend it up to 60 or 90 days.What is the reinstatement rule in life insurance? ›
A reinstatement clause is an insurance policy clause that states when coverage terms are reset after the insured individual or business files a claim due to previous loss or damage. Reinstatement clauses don't usually reset a policy's terms, but they do allow the policy to restart coverage for future claims.Can a Cancelled life insurance policy be reinstated? ›
A life insurance policy may typically be reinstated within 30 days of a lapse without additional paperwork, underwriting, or attestations of health. Insureds often pay a reinstatement premium, which is larger than the original premium.How do you reinstate a lapsed life insurance policy which of the following must be submitted to the insurer? ›
The policyowner must pay all overdue premiums including interest and provide proof of insurability to reinstate a lapsed life insurance policy.How long does it take to reinstate life insurance? ›
Insurers typically allow three to five years to reinstate a policy after it lapses, Ardleigh says. However, they have certain requirements for reinstatement.When can an insurer refuse to reinstate? ›
Note: if it is specifically mentioned in the insurance policy then only an insured can demand reinstatement or otherwise the insurer is only liable ton indemnify in money only. In case of insurer also, it cannot force for reinstatement, if the terms of insurance policy provide other method of indemnification.How do you write a reinstatement letter? ›
- Know who you're writing to. ...
- Look at the current job openings. ...
- Start with a friendly introduction. ...
- State the reason for writing. ...
- Explain why they should hire you. ...
- Conclude with a call to action. ...
- Include your contact information.
Reinstatement allows you to reenter the Federal competitive service workforce without competing with the public. Reinstatement eligibility enables you to apply for Federal jobs open only to status candidates.What are the different types of reinstatement? ›
There are two main types of Reinstatement, “Direct” and “Round the Clock”. This reinstates each layer of insurance as it is exhausted. This means that the Primary layer of insurance will pay up to its limit and then Reinstate the full limit of indemnity, perhaps once or twice, according to what is negotiated.Will an insured be allowed to reactivate a lapsed life insurance policy? ›
You Can Reinstate a Lapsed Policy
If you don't pay your premium, your policy may lapse. To reinstate a lapsed policy, you may have to pay past due premium with interest. If you had a loan against your cash value when the policy lapsed, you may have to pay any unpaid interest and reinstate the loan.
What is reinstatement insurance example? ›
For example, the insurance company will pay the reinstatement value if an individual insures their home with a fire policy and the home catches fire. This compensation helps the policyholder either repair or rebuild the entire house.What is reinstatement cost? ›
The Reinstatement Cost of your home is how much it would cost to completely rebuild the property if it were totally destroyed, for example by a fire. It is not the same as the value of your home, and covers the cost of materials and labour. Reinstatement Costs are for an accurate reconstruction of your property.How can a lapsed policy be revived? ›
The policyholder can reinstate their expired life insurance coverage by fully paying all outstanding premiums and interest.How can an insurance policy be revived after it lapses? ›
It can be revived any time within 5 years from the date of first unpaid premium. To revive a lapsed policy, you need to pay the accumulated unpaid premiums along with the interest. Depending on the policy and the insurer, you will be paying an 8-9% penalty on unpaid premiums for a plan that will yield 5-6% returns.What is the maximum period allowed to insured can reinstate his/her policy? ›
The maximum grace period to reinstate the policy is 2 years where the insured has to pay within the given duration from the time of the last payment. The insured will have to pay the entire pending premium amount of the non-payment duration along with some additional charges levied by the insurance company."What happens if your life insurance policy is terminated? ›
What happens when you cancel a life insurance policy? Generally, there are no penalties to be paid. If you have a whole life policy, you may receive a check for the cash value of the policy, but a term policy will not provide any significant payout.What is unlimited reinstatement? ›
There are also some plans which can be restored unlimited times in the policy year So, it is always advisable to check with your health insurer before opting for this benefit. For most health insurers, the total sum insured is restored only if the entire sum insured is exhausted under a single claim.What can a reinstatement value policy be issued for? ›
The reinstatement value clause is applicable only on fixed assets, such as the building, plant & machinery, furniture, fittings, etc. which are in new condition. However, it does not apply to stocks on the property or in transit.What happens if reinstatement is denied? ›
If reinstatement is denied you must be prepared to depart the U.S. immediately. Also if denied, the visa you used to enter the U.S. is automatically cancelled; you are permanently limited to applying for nonimmigrant visas in the future only in your home country.How do you end a letter asking for reconsideration? ›
You can conclude your letter by restating your request for reconsideration and summarizing your reasoning. Adding this last request in your conclusion can complete your letter and show your eagerness to get the role. Add your signature and print your name after your conclusion.
How do you write a simple letter of suspension? ›
This letter confirms that you are suspended from work from today until further notice while an investigation is done into [a concern / an issue] [give details]. We discussed this [issue / concern] in our meeting on [date] which was attended by you and [names of others at the meeting].Is reinstatement the same as new for old? ›
'Reinstatement' means repairing or replacing a building to the same specifications as before it was damaged - essentially, a like-for-like replacement.What does it mean to reinstate an application? ›
Reinstatement is an application submitted to U.S. Citizenship and Immigration Services (USCIS) by a student who has violated their F-1 status to request return to legal student status. A reinstatement application costs $370 and can take approximately five months to be processed by USCIS.What is the difference between reemployment and reinstatement? ›
Reinstatement for a dismissed employee means returning to the position the employee held at the time of the dismissal. Re-employment may place the employee into a different position, other than the one held at the time of dismissal.What is reinstatement and replacement insurance? ›
Reinstatement and/or Replacement Cover – This insures property on a “new for old” basis. In the event of loss, the insurer will pay the cost of replacing the property or restoring the damage to a condition no better or more extensive than new, without deduction for depreciation.Can a policy be revived more than a year after it has lapsed? ›
However, lapsed policies can be revived. A policy can be revived by paying the past premiums, and additional charges as levied by the insurer. Often, insurers come up with special schemes or campaigns to revive lapsed policies. In such schemes, they would typically waive any penalties or additional charges.What is the maximum amount of time a lapsed life insurance policy can be reinstated quizlet? ›
The max time limit for reinstatement is usually 3 years after the policy has lapsed. If the policy, he/she will have to provide E of I. The policy owner is required to pay all back premiums plus interest (usually will not exceed 6%), and may be required to repay any outstanding loans and interest.How long does life insurance last after termination? ›
What happens to life insurance when you leave a job? Employer-provided life insurance policies typically terminate once you leave the employer. However, some policies may be "portable" after you leave your job, letting you pay for the same coverage via a renewable term life policy.What is insurance reinstatement assessment? ›
Reinstatement Cost Assessment. An Insurance Valuation or Reinstatement Cost Assessment (RCA) is used to calculate the potential cost to rebuild a structure and provide a 'day one reinstatement' figure, also known as the declared value.What does reinstatement value mean in insurance? ›
Reinstatement Value means the cost of replacing or reinstating on the same site, property of the same kind or type but not superior to or more extensive than the insured property when new.
What is reinstated policy in insurance? ›
Definition: If an insured person fails to pay the premium due to various circumstances and as a result the insurance policy gets terminated, then the insurance coverage can be renewed. This process of putting the insurance policy back after a lapse is known as reinstatement.How do I get my reinstatement value? ›
Whenever you need an insurance reinstatement valuation you should contact a professional Chartered Surveyor who can provide you with an accurate valuation that you can use to obtain the right insurance cover for your property, pay the right insurance premiums and ensure that you get the proper cover.How do I reactivate my insurance policy? ›
You can reinstate your auto policy by calling your insurance company or contacting them through their website or mobile app. If you pay the premiums you owe within your insurer's grace period, they will reinstate your policy and you may not have a lapse of coverage on your record.What happens if you let your life insurance expire? ›
Once the plan ends, you won't be covered and nor will your beneficiaries receive any payout upon your death. Of course, that means you no longer need to pay your monthly premium as well.What is the way to revive a lapsed policy of life insurance? ›
The policyholder can reinstate their expired life insurance coverage by fully paying all outstanding premiums and interest.What happens when life insurance is terminated? ›
A notice is sent by the insurance carrier that the policy is no longer in effect, the policyholder stops paying the premiums, and there is no longer any potential death benefit. If the policyholder had a return-of-premium policy, a check would be sent for the amount paid into the policy throughout its term.Can I renew my policy after it expires? ›
You can renew the expired policy during the grace period i.e. 90 days from the expiry date. However, post the expiry of the grace period, you would be required to purchase a new policy.How long can you go without paying life insurance? ›
What is the grace period on a life insurance policy? Your grace period — the amount of time you have to make a payment after the due date and bring your life insurance policy back to good standing — is usually 30 days, but it depends on your policy and insurance provider.What happens when my 20 year term life insurance expires? ›
Your family won't receive a death benefit after your term life insurance policy expires, so you'll need a replacement policy to continue coverage. You can convert your policy into permanent insurance or buy a new term policy to replace coverage. You may not need new coverage if you don't have financial dependents.What is the maximum period allowable for reinstatement of a lapsed policy? ›
Most policies can be reinstated within five years of lapsing as long as overdue premiums are paid and loans against the cash value are satisfied. Most companies require proof of insurability, however, reinstating a lapsed policy can be less expensive that purchasing an entirely new policy.
What are the other methods of revival of lapsed policy? ›
Paying the right premium: To revive the policy which has lapsed you need to pay the unpaid premium along with the interest rate which is specified by the insurer. In some cases you may have to pay a penalty.What is the advantage of reinstating a policy? ›
What is the advantage of reinstating a life insurance policy as opposed to applying for a new one? Policy premium in a reinstated policy will be set according to the insured's original age.Can life insurance companies refuse to pay out? ›
If you commit life insurance fraud on your insurance application and lie about any risky hobbies, medical conditions, travel plans, or your family health history, the insurance company can refuse to pay the death benefit.