I’m probably not headed in the direction you might think with that title, but we need to have a talk. I have clients that have been paying their life insurance bills that were mailed to them and checks mailed back to the company for 20 years without a hitch. I also have clients who have not received their bills in the mail and when I call them because of a late payment, or in some cases a lapsed policy because I also didn’t get a late payment notice in the mail, well, it can cause problems for them. It is absolutely worth noting that not all states require life insurance companies to send late payment notices, so if you miss a bill in the mail the next correspondence you receive (if you do) will be a lapse notice.
There is a grace period on payments of 30 days. This gives you extra time in case you are short of money when the bill comes, but when you don’t get a bill and life is busy, it can slip past that grace period. Most companies offer another 31 days when you can reinstate your lapsed policy without proof of insurability by simply sending a check or calling and making a payment by phone. After that two month window you are stuck applying for reinstatement. This brings to mind a couple of thoughts for me. 1. Do you really trust the USPS coming and going to get the job done? And seriously, if your bill comes in December and you are trusting the USPS both ways, do you still believe in Santa? I believe in Santa but my life insurance is on an EFT, electronic funds transfer. 2. I know insurance companies would argue against this, but if you’ve had a policy in place for several years and it lapses because you miss a payment, do you think they have a strong interest in reinstating it, or possibly just calling all of the payments made as profit with no further need to worry about paying a death benefit?
If you have a bill reminder system in place and will know to call your life insurance agent or the company when it’s time to pay and you haven’t received anything, that is far better than any misplaced trust in the mail. A clear cut above that is to have your payments on an automatic bank draft. All companies require an EFT for monthly payments and, while not required, most will draft your checking account quarterly, semi annually or annually. They will even mail you a notice to let you know the draft is coming up. I have a great comfort level with EFT on my own life insurance and haven’t had a payment issue, EVER, in the last 25+ years.
Bottom line. No matter what line of thinking and action you choose, make a plan that avoids life insurance lapse. Everything can go fine and your life insurance can be reinstated, but one small health change and you will not only be without life insurance during the reinstatement application process, but may not get it back at all. If you have questions or have been denied reinstatement due to a health change, call or email me directly. My name is Ed Hinerman. Let’s talk.