Life Insurance Lapse Illinois IL

Reader’s Question:

Why does a life insurance policy lapse? If my life insurance policy lapse, how can I have it reinstated?

Amy

Chicago, IL

A lapsed life insurance policy occurs when the policy holder fails to pay the life insurance premium when due. When the policy holder missed the payment period, the life insurance company allows a grace period where the policy owner can pay the life insurance premium within the period of 30 to 31 days. If the life insurance premiums remain to be unpaid after the grace period, the life insurance policy goes to the state of a lapsed premium. This happens to term life insurance policy. With permanent life insurance policy, the state of lapse can happen in the initial year or two since there is no significant dividend or cash value. After a few more years, there is a build-up in cash and loan values that makes the life insurance policy not to lapse easily.

Life insurance company gives an opportunity for lapsed life insurance policy to be reinstated. Usually, they allow a 5-year period for the policy holder to pay all the outstanding premiums. However, if the policy holder becomes uninsurable, the life insurance policy cannot be reinstated. In addition, if the life insurance policy has been surrendered for the cash value, reinstatement cannot take effect.

Tags: life insurance