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Sometimes life doesn’t always go as planned—that’s one reason term life insurance is a great financial product to own. There is no penalty for cancelling a term policy either. If you stop paying your premiums, your policy terminates. No cancellation fees.

But what happens if I just can’t afford to pay the premiums on time?

Maybe you are injured and out of work, or an emergency drained your savings, or you simply forgot to send in the check; whatever the reason, you didn’t pay your premiums.

What happens now?

Whether you are struggling financially or simply forgot to pay the bill, your term life insurance policy may lapse, and you’ll no longer be covered.

All term life insurance policies have a grace period, with most of them lasting 30 days from the original due date. However, if you fail to make the premium payment within the grace period, your term life insurance policy will lapse, and you will need to have it reinstated.

Before we get too much into specifics, let’s get a quick reminder of how life insurance works.

A term life insurance policy is a contract between you and the life insurance company. You agree to pay a certain amount and they promise to pay out a lump-sum to your beneficiaries should you die. If you stop paying the agreed upon amounts, then your policy will simply lapse and you would no longer be covered.

Don’t panic immediately though, because all term life insurance policies include that grace period we just mentioned.

Life Insurance Payment Grace Period

As long as you make the payment—and the insurance company receives and processes your payment within that grace period—your policy will not lapse. So, while it is important for you to make your payments on time, you will be relieved to know that you are still covered during the grace period.

Example: Your term policy’s monthly premium is due April 30th but you are unable to make the payment by that date. If you die May 5th, the insurance company will still pay out the death benefit because you died within the grace period.

See what you’d pay for life insurance

Comparison shop prices on custom coverage amounts from the nation’s top carriers with Quotacy.

Lapsed Life Insurance Policy

If you aren’t able to make the premium payment by the due date (or within the grace period) your policy will lapse.

A lapsed policy means that it is no longer active. You will not be covered and your beneficiaries would not receive a death benefit if you died. Additionally, your past payments will not be refunded if your policy lapses.

After a policy first lapses, the owner may have the option to reinstate the policy within a certain period of time (depending upon the company), but you may have to prove your insurability by going through the underwriting process again.

Reinstating a Lapsed Life Insurance Policy

If your policy lapsed but you still want to be covered, you can apply for reinstatement. Each company has its own guidelines for reinstatement but most will allow you to apply up to five years from the end of the policy’s grace period.

What is usually required when applying for reinstatement:

  • Reinstatement Application: All companies will ask you to complete a reinstatement application that is similar to the original application you filled out for the policy.
  • Health Statement: Most companies want to see if anything has changed with your health since you first applied. If you apply for reinstatement within 30 days of the grace period ending, many insurance companies won’t even need this statement and no underwriting would be necessary to reinstate the policy.
  • New Medical Exam: Most companies won’t require this if you apply for reinstatement within a certain amount of time, typically within six months of the end of the grace period, but this varies by insurance company.

Even if you apply for reinstatement within a couple months, you may still be asked to complete a new medical exam if the answers on your health statement suggest you’ve experienced some health changes.

It would not be wise to attempt to trick the system and lie on your health statement. If it is discovered during the claims process that you lied, the insurance company can dispute all (or part of) the benefit your beneficiaries would receive upon your death.

As a general guideline—the less underwriting the better—because if a new health condition is discovered, you may no longer qualify for the same rates and your premiums would increase when reinstated.

Finally, it’s important to know that, if you are approved for reinstatement, you will be required to pay the premiums due from the end of the grace period. If you’ve let your policy lapse for a few years—that could be a significant amount.

If you haven’t paid your term life insurance premiums and let your policy lapse for a considerable amount of time, applying for a new policy altogether may be a better choice.

Automatic Payments

If the reason your policy lapsed is because life got crazy and you simply forgot to send in a check, we recommend that you make the switch to automatic payments.

All major life insurance carriers offer the ability to automatically draft your premium payments from your checking account.

Make life easier on yourself: set it and forget it.

With automatic payments, you’ll never need to worry whether your loved ones are financially covered if you would die unexpectedly.

Help for Lapsed Insurance Policyholders

If your life insurance policy has lapsed and you are shopping for a new one, take a minute to see how little it would cost you to get a new term life insurance policy.

At Quotacy, there is no need to enter any personal contact information to get your comparison quotes. With our comparison tool, you’ll be able to see your quote instantly and adjust the coverage amount and term length as needed before starting your application.

Remember, term life insurance gives peace of mind by ensuring your loved ones are protected—so it’s worth it to set up a stress-free system to pay your premiums. But, if you didn’t, no worries. We can help you the second time around as well.

Watch the Missed Life Insurance Policy Premium Payment Video

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius, CLU

Senior Editor and Licensed Life Insurance Expert

Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.