Tips For Handling a Lapsed Life Insurance Policy
If you miss your premium payments, the life insurance company might let your policy lapse. Many people forget to make a payment or two, especially if they reach advanced age or become ill/injured; unfortunately, that’s also when circumstances are most likely to trigger the need for policy benefits. If you missed premium payments and your policy is set to lapse, or if your policy has already lapsed, you have options. If your life insurance policy has lapsed or if you are struggling to get your insurance claims paid, call a seasoned Los Angeles insurance denial lawyer for advice and assistance.
Gather All Relevant Documents
As with any insurance or legal claim, protecting your rights and obtaining the benefits you are due will likely turn on providing the right evidence to support your claim. If your life insurance policy has lapsed, you’ll need to gather a number of documents to prepare for the next step. These documents include:
- Policy Documents. Collect all documents relating to your policy. Gather your actual policy, any addendums or changes, and any relevant communications between you and your insurer. The policy dictates the terms of your contract with the insurance company, including when premiums are owed and what notice and grace periods you should be guaranteed prior to lapse. If you have a permanent life insurance policy with cash value built up, for example, you might be able to rely on that value to pay overdue premiums.
- Proof of Payments. You might need to challenge the policy lapse. For that, you’ll need proof that you made payments. Collect bank statements, receipts or other records that show when you did make payments on the policy. You may have proof that the insurer was wrong about a missed payment. At the least, you’ll be able to put together a timeline of your reliability in making payments as well as identifying when the premium payments stopped, which could be useful in either saving the policy or applying for reinstatement.
- Lapse Notices. California law requires insurers to give you and designated parties notice of a missed premium payment and additional notices in advance of policy termination. Those notices set the timeline for policy lapse. If they failed to give you proper notice, or if you are still within the grace period guaranteed by the policy or California law, you may be able to prevent or reverse the policy lapse.
- Medical Records. You may need to apply for reinstatement of the policy, or you may be trying to collect benefits under a policy that has allegedly lapsed. In either case, you’ll likely need to provide medical evidence of the insured party’s health and/or evidence relating to their death.
The Insured Person Is Still Alive: Fix the Missed Payments or Apply for Reinstatement
California law guarantees policyholders the right to correct a missed premium payment before terminating the policy. The insurance company must give notice to the policyholder and any persons designated under the policy to receive notice of missed payments. The parties must be given at least 60 days’ grace to pay the overdue amounts and keep the policy in effect. So long as payments are made within the grace period, the policy should not be allowed to lapse. If the insured party is still alive, insurers often give an extra window of time without needing to go through the whole reinstatement process.
If the policy has lapsed, typically you’ll be able to apply for reinstatement of the policy. You will likely need to submit a reinstatement application, which will require answering questions about the current state of health, finances, and other matters. You may need to undergo a medical examination and/or provide medical records in order to prove that your health has not substantially deteriorated since your original application.
If your health is mainly unchanged since your original application, your reinstatement application is likely to be approved. You’ll still owe the premiums missed prior to lapse, likely with interest. If your health has changed for the worse, however, the insurer might deny your application for reinstatement. You would then need to apply for a whole new policy, which is likely to be significantly more expensive. Especially if you have advanced significantly in age since your original application, you should aim for reinstatement rather than obtaining new coverage.
Keep in mind that you must be honest in your application for reinstatement. Reinstatement can restart the two-year “contestability period,” which means that the insurer can rescind your policy if they discover any material misstatements in your application. They can rescind the policy at any time within two years of reinstatement, even after you pass away and your beneficiaries file a claim for benefits.
The Insured is No Longer Alive: Challenging a Benefits Denial
If you do not discover that the policy has lapsed until your loved one has passed away, you cannot simply reinstate the policy and get benefits. Instead, your goal is to collect benefits under a policy that the insurance company claims is no longer in effect. As your life insurance denial lawyer will tell you, just because the insurer claims they terminated your policy does not mean that they had the right to do so.
California law protects insurance policyholders and beneficiaries. Life insurers must give proper notice prior to terminating a policy for nonpayment of premiums. When a premium payment is missed, the insurer must notify both the policyholder and any person designated to receive notice under the policy. Policyholders typically designate a family member or other beneficiary to receive notice in case the insured party misses a payment due to age, illness, or injury. The insurer must send a notice after a missed payment and another notice well in advance of terminating the policy, and during that grace period, the missed premium may be corrected. If the insurance company fails to give proper notice, the beneficiaries have grounds to challenge the policy termination.
Call a Dedicated California Life Insurance Denial Law Firm Today for Help Collecting Your Benefits
If your life, disability, or health insurance claim was wrongfully denied, or if you have otherwise been subjected to bad faith insurance conduct, fight for the coverage you are due with the help of the accomplished and effective Los Angeles insurance denial lawyers at Gianelli & Morris for a free consultation at 213-489-1600.