Recovering From a Life Insurance Lapse

A life insurance policy lapse happens when you miss payments and the policy is terminated due to nonpayment. When a lapse occurs, coverage ends, and your loved ones may no longer be protected if the unexpected happens. 

Depending on the type of policy and how long it's been inactive, a lapse could mean losing valuable benefits — along with the peace of mind and financial security the policy was meant to provide. In some cases, you may also lose any cash value you had built up over time.

Here’s what you need to know:  

What happens if a policy lapses?

Once a policy lapses, your provider is no longer obligated to pay a death benefit. This means your beneficiaries could lose their financial safety net. In some cases, permanent policies may have a cash value that can be used to cover premiums temporarily. But when that’s depleted, the coverage ends.

Can you reinstate a lapsed policy?

Oftentimes you can take advantage of a grace period — usually around 30 days — during which you can catch up on missed payments. Even after the grace period, you might be able to reinstate the policy, though you may need to fill out a reinstatement application and provide proof of insurability. You might be charged a late fee or be required to repay premiums retroactively.

Can you get your money back?

If your policy lapses, you generally won’t receive a refund of paid premiums. However, if the policy had accumulated cash value, any remaining balance might be returned to you, depending on the terms. Keep in mind that some policies charge surrender fees or deduct unpaid premiums from the amount refunded.

If you have questions about managing your financial protection or planning for the unexpected, reach out anytime.