What Happens If You Stop Paying Insurance Premium
Before we proceed lets take an in-depth look at this scenarios where Mr. A and B fail to pay their Insurance Premium
Mr. A has an insurance policy with X Insurance Company. Mr. A last paid his insurance premium two years ago, and he died in the third year as a result of a heinous auto accident. A few days later, his family receives a call from the insurance company informing them that Mr. A has a policy and that they should come to collect their lump sum.
Mr. B is insured through X Insurance Company. Mr. B last paid his insurance premium two months ago, and he becomes ill five months later, necessitating surgery. While the family raises funds for surgery, Mr. B’s wife recalls that he has an Insurance Policy and decides to call the Insurance company, only to learn that she will not receive any money because Mr. B stopped paying his insurance premiums.
With these scenarios in mind, let us now look at what happens when you stop paying your life insurance premiums.
Failure to make your payment on time may result in serious consequences, depending on the terms and conditions of your policy. Continue reading to learn about the consequences of failing to make one or more life insurance premium payments.
- How Do Life Insurance Payments Work?
- Is it possible for your policy to lapse if you miss a payment?
- How to Avoid the Loss of a Life Insurance Policy
- What to Do If Your Insurance Policy Lapses
1 How Do Life Insurance Payment Works?
Premium payments may be due month by month, quarterly, semi-annually, or annually, as stated on your contract with your life insurance provider. Monthly or quarterly payments are typically easier to allocate for because of their frequency and smaller size. However, several insurance companies impose extra fees to process these frequent payments, which could also cost you more in the long run.
Paying premiums semi-annually or annually can help avoid additional costs, but will require a large lump-sum payment. Whatever the premium payment structure, ensure it’s included in your budget and make frantic effort to free up cash for payments if your finances are tight.
2 Does Your Policy Lapse If You fail to Pay Insurance Premium?
3 How To Avoid The Loss Of An Insurance Policy
There are numerous ways to ensure that your insurance premium is paid on time. Insurance policies frequently lapse due to forgetfulness rather than a lack of funds. Below are some helpful tips to help you stay on course
- Enlisting in autopay through your insurance provider or using the bill payment service provided by your financial institution.
- Ensure timely processing, make your insurance premium payments at the beginning of the month, several days before the due date.
- To better prepare for large annual or semi-annual payments, you might consider setting up an automatic transfer to another savings account to be prepared when the time comes.
- Set reminders for insurance premium payments
What can be Done if your Policy has Lapsed?
Most Insurance companies have a Revival period within which a lapsed policy can be reinstated. And the procedure for reinstatement are are follows
- check Revival period – Run a check to ascertain if your policy still falls under the revival period. Most Insurance companies provide a period of 2 to 3 years
- Application – In a bid to reinstate a lapsed policy, the policyholder needs to make an application for revival to the insurance company.
- Due payment and penalty – To be able to revive a policy, one must pay all past-due premiums for all years since the policy’s lapse, as well as any penalties imposed by the insurance company for non-payment of premiums.
- Medical Checkup – In some cases, a medical check at the assigned medical center is required. In other instances, the revival may require a declaration of good health.
- Updated Terms and Condition –Because a reinstated policy is equal to a new one, the insurance company may impose new terms and conditions. The policyholder must take note of this by reviewing the new policy documents.