It can happen to anyone. Finances become tight, a bill gets misplaced, or an unexpected illness or disability results in a late payment on your life insurance policy and it lapses for nonpayment.
It's important to understand your options for safeguarding your life insurance policy against an unexpected coverage lapse when faced with a financial crisis. Here are four things you can do that may help prevent you from losing your life insurance coverage due to a nonpayment termination.
- Set-up automatic payments
Try and set-up an automatic deduction for your monthly 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.
- Add a waiver of premium policy rider
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 you policy in force.
- 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. Depending on your contract, that additional time could be as long as 30 days (this is indicated in your policy). If you're not sure what to do, call your agent or company representative as soon as possible to understand your options.
- 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.
For more information on how life insurance works, visit the Protective Learning Center.
*As long as required premium payments are timely made.