UPDATED: Nov 14, 2011

Advertiser Disclosure

It’s all about you. We want to help you make the right life insurance coverage choices.

Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider.

Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from top life insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Written By: Laura BerryReviewed By: Daniel WalkerUPDATED: Nov 14, 2011Fact Checked

Life insurance provides financial security to your loved ones in the event of your death. Whether to pay off funeral expenses or provide funds for your spouse and children to live on after your death, life insurance can provide peace of mine to the policyholder. By paying a monthly premium to the insurance company, you guarantee that your beneficiaries will receive the agreed-upon death benefit. Unfortunately, though, unexpected events can arise and payments may be lost or forgotten.

A policy that is not paid when due may lapse, causing you to lose coverage. If you happen to die while your policy is lapsed, your loved ones will not receive the death benefit, and any money you paid into your policy will have been lost. It’s important to keep track of your insurance premiums and address any late payments as soon as possible in order to avoid gaps in coverage. Nevertheless, sometimes a missed payment is inevitable.

What happens if you miss a payment and your policy lapses?

If you’ve only recently forgotten to pay your premium, you may be able to take advantage of your policy’s grace period. This means that if you miss a payment your insurance will stay in force for a certain period, usually one month, to allow you to make up the missing payment before the policy is terminated. If you have a poor payment history with your life insurance, you may not have a grace period. Additionally, if you fail to pay back the entire amount to bring a policy current, the policy may still lapse at the end of the grace period.

If you’re unable to use a grace period and your policy does lapse, you will need to request a policy reinstatement. A reinstatement requires you to resubmit the medical history questions, and may also require an additional medical exam. You must also submit the total amount of owed payments to the insurance company in order to bring your account current for the time since it lapsed.

Assuming your health condition is the same as it was when you took out your policy, reinstating should not be difficult. If, however, your health has declined since taking out the policy, you may not qualify to reinstate. If this happens, you may have a doubly difficult time in obtaining a new policy: Your lapsed policy may count against you when applying for a new one, and any preexisting health conditions may damage your odds as well.

Term Policies vs Whole Life Policies

If you have a term life insurance policy, your policy does not have a cash value. Your policy will pay its benefit only if you keep the policy up-to-date and pass away during the policy period. Otherwise, if the policy lapses or you outlive the policy term, you and your beneficiaries will receive no financial benefits. If your policy is universal or whole life, however, your policy does have cash value, and behaves differently from term insurance when a payment is missed.

If you have universal or whole life insurance, you may have more options available to you than if you had a term life policy. Because a portion of every premium you make goes into an interest-bearing account, you may have enough money to cover for the missed payments. Using the cash value of your policy to cover the premiums is considered a premium loan, and you have the option to pay back the lost funds into your account over time.

Alternatively, you can select to surrender your policy for one that’s paid-up. This means that you trade your existing account value for a policy with similar coverage but no monthly premiums. You can also choose to cash out a universal policy in exchange for a term policy.

Universal life insurance policies can be more expensive than term policies, but they are more flexible and substantially more forgiving of a late or missed payment. Even if you have a term insurance policy, you may still be able to discuss your options with your insurance provider in the event of a missed payment, especially if you have a long history with the company.

Prior to purchasing any life insurance policy, you should take the time to review the terms of the agreement. Some policies may have a longer grace period than others, or have differing rules about reinstatement, that may make a huge difference in the event of missed payments. All other factors being equal, you may choose a policy with more flexibility. You may also opt to select a universal life insurance policy instead; the premiums are higher, but the security the investment account offers may prove worthwhile for your family’s needs.

Compare Life Insurance Quotes online today!

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.

A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

Full Bio →

Written by Laura Berry
Former Insurance Agent Laura Berry

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

Full Bio →

Reviewed by Daniel Walker
Licensed Car Insurance Agent Daniel Walker