Why Do Life Insurance Policyholders Lapse?
- 1165 POINTSview profileChris AbramsFounder, Abrams Insurance Solutions, Inc., San Diego, CALife insurance policyholders don't lapse per se, but life insurance policies do. When a life insurance premium bill is received, there is a stated due date for the premium. The life insurance company then provides an additional 30 days past the due date before the policy lapses. Technically, coverage stops at the end of the 30 day lapse period if no premium is paid. After the lapse period, there is a 30 day reinstatement period, in which there is no coverage, but the missed premiums can be paid to put the policy back in-force. If premiums are not paid during the reinstatement period, the only way to continue coverage is to go back through medical underwriting.Answered on May 14, 2013flag this answer
37376 POINTSview profileDavid G. Pipes, CLU®, RICP®Business Development Officer, T.D. McNeil Insurance Services, Fresno, CaliforniaLife insurance companies do everything that they can to maintain a life policy. If a premium is paid within 30 days of the due date, it is accepted and policy remains in force. If there is cash value in the policy, the cash value can be used to maintain the policy in force. People do stop paying on their life insurance policies. This is usually due to a change in circumstances.Answered on July 1, 2014flag this answer
21750 POINTSview profileJim WinklerCEO/Owner, Winkler Financial Group, Houston, TexasThat is a great question! There are a couple of common reasons I've found for why most policies lapse. The most common is that people no longer can afford the policy, and so just stop paying it. This is unfortunate, as often they leave cash in the policy that could have been theirs. Another common reason is that the person who had been paying the premium passes, and no one knew the payments weren't being made. I've seen this far too many times when a parent or spouse has passed, and the insured receives a notice of cancellation. The last is poor record keeping. People switch bank accounts, and forget to notify the insurance company, which tries to draw payment off the closed account, and the policy lapses. I hope that helps, thanks for asking!Answered on July 2, 2014flag this answer
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