My Life Insurance Lapsed. Now What?

Although life insurance is an important thing to have, it certainly isn't free. And if you stop making your premium payments, generally speaking, your coverage will end. However, it may not end right away. And even once it ends, you may have the option to get your life insurance back.

When your life insurance policy lapses

Most of the time, you'll have a grace period from when you miss a premium payment to when your life insurance policy officially lapses. Progressive says that most life insurance policies give you a 30-day grace period, but some might give you 60 or 90 days. You'll need to review the details of your life insurance policy to see what your options entail.

You can generally avoid having your life insurance policy lapse by paying your missed premium before your grace period ends. Also, your life insurance company must let you know that you've missed a payment and are in a grace period. They must also tell you that your life insurance policy has lapsed once that happens officially.

Now you should know that in some cases, a missed premium payment won't lead to your life insurance lapsing. If you have whole life insurance, which accumulates a cash value, your insurer can apply that cash value to what you owe on your premiums. But if there isn't enough built-up cash in your policy to cover a missed premium payment, then your policy might lapse.

And if you have term life insurance, your policy won't have a cash value at all. So if you miss a term life payment and don't make good on it during your grace period, your policy might lapse.

What to do after your life insurance policy has lapsed

Many life insurance policies have a reinstatement provision that allows you to get your coverage back if you meet certain criteria. You may, for example, be able to get your insurance coverage back if you reach out to your insurer within a short period of time, certify that your health hasn't changed, and make up the missed premium(s) you neglected to pay.

But again, as is the case with a grace period, the process for having your life insurance policy reinstated will depend on the specifics of your policy and insurer. So you'll need to review your contract and reach out to your insurer to see what options are available.

How to avoid having your life insurance lapse

The best way to avoid a lapsed life insurance policy in the first place is to make sure you can afford your premiums. To this end, you may want to opt for term life insurance over whole life coverage.

Whole life insurance does offer the benefit of permanent coverage, and your policy can accumulate a cash value over time. Term life insurance only covers you for a preset period of time and accumulates no cash value -- so if you don't end up passing away during your coverage period, your beneficiaries get no payout.

But term life insurance tends to be far more affordable than whole life insurance. And so you may be better off opting for term life insurance so you're less likely to fall behind on your premiums and risk losing your coverage.