With the exception of those who are just gifted with bill paying prowess and those of us who take the chicken route of putting our life insurance on an automatic bank draft, at some point the others have a good chance of having their life insurance lapse. A life insurance lapse means that you have gone beyond the due date for the premium and also gone beyond the 30 day grace period without reading all of the reminders you’ve been getting in the mail and from your life insurance agent.
The truth is a bill can get lost in the mail and is legitimately missed, but the back up consists of a past due notice when the policy goes into the grace period and often two past due notices. Most companies, at the end of the grace period when the policy is lapsed and no coverage exists, will send another letter and offer a chance to simply pay the past due premium for a short period, usually another 20 or 30 days without requiring a reinstatement application.
A reinstatement application is just what it implies. You are applying for a chance to get your policy back and if approved you can put it back in force at the same rate you were paying by sending the back premium. Keep in mind that by this time you have probably gone through up to 60 days in grace periods where no application was required and the application may take a month or two just like it did when you first applied, so putting it in force again may take 4 to 5 months premium.
Also keep in mind that it is an application and it can be approved, approved at a different rate if you’ve had health changes, or declined. I’m sure life insurance companies don’t think like this, but if you’ve had a policy and been paying money for 15 years and they haven’t had to pay out a death benefit, is their really any incentive for them to reinstate a policy that puts the death benefit back into play? I would like to think everything is straight up, but…..?
Bottom line. If you have problems with mail or bill paying, put your life insurance on an automatic bank draft. I’ve done this on all of my policies and, honestly, it’s the longest string of on time payments for anything I’ve ever had. Everything else goes in to my bill pile and is subject to the bottom of the pile syndrome. If you have questions about past due premiums or reinstatement, call or email me directly. My name is Ed Hinerman. Let’s talk.