You may be wondering, “What happens if you stop paying your life insurance premiums?” If you don’t have enough money to make all of your premium payments, there are several options available to you. You can reduce your coverage or cancel it entirely. There may be a grace period to pay off past-due premium payments, but if you miss it, your insurance will be cancelled.
Reducing rather than canceling life insurance coverage
If you’re struggling with life insurance premiums, consider reducing coverage rather than canceling the policy altogether. If your family is large enough to cover your policy’s full premium, this may be a viable option. Otherwise, you might need to review your policy’s coverage to determine whether it makes financial sense to cut coverage.
Some people decide to drop life insurance coverage altogether because it eats into their monthly budget. This can be a wise option if your income is low and you’d like to have more money for other needs. However, there are other options that may help you maintain coverage, including maximizing your Paid-Up Additions (PUAs) rider.
You can also reduce the death benefit of your permanent life insurance policy by lowering your premium. By lowering the death benefit, the carrier will consider the policy paid up and your premium will go down. You may also opt to drop a few policy riders, which will reduce your monthly costs.
Options after you stop paying premiums
If you have stopped paying your life insurance premiums, you have several options. Many policies have a grace period that allows you up to 30 days to catch up and pay the premiums. If you miss another 30 days, your policy will become “lapse pending.” If you are unable to make your payments, contact your insurer to ask about your policy’s status and the impact of not paying the premiums.
Some insurers also offer payment options, such as modifying the due date or breaking up past-due premium payments. The only catch is that if you are unable to make the premium payments for any reason, your policy may be canceled. However, if you make the premium payments on time, your policy may be reinstated.
Retaining policy after grace period expires
If you’ve stopped paying life insurance premiums, the grace period that protects you from losing coverage has passed. After that, your policy is no longer valid and you will need to make up the missed premiums plus interest. In addition, if you want to reinstate your policy, a new underwriting process may be required. This will mean a new risk assessment and higher premiums. But if you are unable to pay your life insurance premiums, your policy may still provide you with valuable protection.
The DOI is working with insurance companies to minimize the impact on financial health and regulatory obligations. While extending the grace period does not eliminate your obligation to pay your premiums, it limits the amount of time that carriers can cancel your policy for late payments. This bulletin will remain in effect until June 1, 2020.
Insurance companies understand that things happen. Sometimes, you’re unable to pay a premium on time, or you misplace a bill. In such cases, insurance companies will usually extend the grace period. This gives you extra time to make up the missed payments. Some companies will send you a reminder that includes the length of the grace period.
A lapsed policy can cause a number of problems. Some policies use their existing cash values to pay the premiums. If you stop paying your life insurance premiums, your policy may automatically use the cash value in your account to pay for your premiums. Eventually, the policy will lapse and no longer provide any benefits.
A three-month grace period applies to people who receive federal subsidy assistance in the form of advanced premium tax credits. If you’ve stopped paying your premiums during this grace period, you will lose your eligibility for the subsidy. In addition to paying the premiums, you must also return your premium tax credit.
You should be aware that grace periods for insurance premiums vary widely from company to company. Check your policy carefully to see how long the grace period is and what penalties will apply if you’re past due. Some policies may not have grace periods at all.
If you don’t pay your life insurance premiums for more than 30 days, your policy will lapse. Some insurers will allow you to extend the grace period up to 90 days. Depending on your policy, you may be able to reinstate it after the grace period ends.