At one time or another, it has happened to nearly all of us. Whether it's a misplaced utility bill, a credit card statement that got lost in the daily shuffle, or simply having too much month at the end of the money, sometimes bills get paid past their due date and become late.
If this happens and you find yourself running late in paying your life insurance premiums, don't panic. Unexpected expenses can happen and when they do, your first plan of action is to contact your life insurance agent or company representative. Depending on how past due you are, the type of life insurance policy you have, and the insurance company's guidelines, you may be able to quickly resolve the problem.
For example, if you missed a premium payment, you may still have coverage if you can make your payment soon after the payment due date. In fact, many life insurance companies typically have a built-in grace period in which to pay your premium. Depending on your contract, that additional time could be as long as 60 days. If you're not sure, this information is indicated within your life insurance policy.
If you find you have gone beyond the allotted grace period, the life insurance company may terminate your policy. Again, depending on your contract, you may not be allowed to simply get caught up on your premium payments and request to have your policy reinstated. In fact, some insurers may require that you provide some evidence of insurability in order to consider a policy reinstatement.
Life insurance premium payments are required in order to keep your coverage in force. You may be asking, “How does life insurance work?” For this reason, it's important to understand your policy's terms and conditions to avoid the potential consequences. If possible, try to set up a reminder of when you're premiums are due. Other options include having your payments deducted from your bank when due — if you can manage.
Here are some measures you can take that may help prevent you from losing your life insurance coverage due to a nonpayment termination.
1. Set up automatic payments
Try and set-up an automatic deduction for your life insurance premium payments from your bank account. Most insurers have this option available for this very reason. If you prefer not to have auto deduct and are able to manage it, ask about making quarterly or even annual premium payments.
2. Add a Waiver of Premium Policy Ride
In the event you become disabled due to an accident or serious illness, chances are you may not be able to work for an extended period of time. If this happens, you may find yourself unable to make your monthly life insurance premium payments. As a safeguard, ask your insurance agent or company representative about purchasing a waiver of premium policy rider. This optional rider will waive your premium payments during a prolonged period of unemployment due to a qualifying illness or disability, allowing you to keep your policy in force.
3. Call your agent or company representative immediately
Depending on how past due you are, the type of life insurance policy you have, and the insurance company's guidelines, you may not be too late. In fact, many life insurance companies typically have a built-in grace period in which to pay your premium before your policy terminates. If you're not sure what to do, call your agent or company representative as soon as possible to understand your options.
4. Select the automatic premium loan provision
If you have a permanent* life insurance policy and have enough accumulated cash value, you may be able to set up an automatic premium loan provision. If your policy is in danger of lapsing for nonpayment, a loan will automatically be taken against the cash value of your policy and pay your premium. However, for this to happen, you must have enough cash value built up in your policy in order to cover the premium. Other options include having your payments deducted from your bank when due – if you can manage.
The policy features discussed in article do not apply to every life insurance policy. Always contact your agent or carrier to discuss your specific policy.
For more information on life insurance and how it works, visit the Protective Learning Center.