Can Sometimes Be Reinstated
Lapsed life insurance policies.
Life Insurance companies write a clause into policies which allow policy owners to reinstate lapsed life insurance policies.
To put this into proper perspective, however, it should be pointed out that many policies that people assume are in a state of lapse are in fact still in force.
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How To Handle A Lapsed Life Insurance Policy
- How A Policy Goes In A State Of Lapse
In order for a life insurance policy to remain in force the owner is required to pay premiums when due. In the event that a payment is missed the life insurance company allows a period of 30 or 31 days for the premium to be paid.
This period is commonly referred to as the grace period. At the end of this period if the premium remains unpaid the policy goes into a state of lapse.
As term life policies have no cash value this is usually the case. They lapse. Permanent life insurance policies are a little different.
They will lapse in the initial year or two as there is no significant cash value or dividend, however, as the years pass the cash and loan values build up and policies such as these don’t lapse that easily…
Unless otherwise elected what is called an automatic premium loan kicks in and pays the outstanding premium…thus allowing the life insurance policy to remain in force.
Keep in mind that the cash value of a permanent policy is always accumulating interest, even if it is only the guaranteed minimum interest rate, thus it takes a long time before the policy goes out of force.
Although it will eventually lapse these features give the policy owner time to catch up on the unpaid premiums.
- Reinstating Lapsed Life Insurance Policies
When a policy lapses the life insurance company gives you an opportunity to reinstate the policy usually within 5 years by paying all the back premiums due. There is one problem that might get in the way. If the insured has become un-insurable reinstatement cannot be effected.
If a policy has been surrendered for its cash value it cannot be reinstated.
Check your old life insured policies …they may not have lapsed at all.
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