How to Avoid a Life Insurance Policy Lapse
Life insurance companies are notorious for allowing policies to lapse because the policyholder forgot to pay a few premiums. People become more forgetful as they age or become ill or injured, which is precisely when they need their life insurance the most. If you’re worried about your life insurance coverage lapsing, or if you’re concerned your relative may forget to pay their premiums and you may lose out on your benefits, read on. Our seasoned California life insurance policy lapse attorneys offer tips on how to protect yourself against policy lapse.
Always Pay Your Premiums
Life insurance companies are permitted to terminate a policy or allow it to lapse should the policyholder stop paying premiums. After a grace period, the policy can be terminated. The best way to avoid lapse or termination is, of course, to continue paying your premiums for as long as you want the policy to remain in effect.
There are a few ways to give yourself extra protection against policy lapse based on missed premiums. These may include:
- Enroll in automated payments. Insurance companies typically allow you to enroll in automatic payments, which will automatically deduct the cost of your premium from your bank account or credit card each month. This saves you the trouble of remembering to pay each month. If you change bank accounts or credit cards, make sure to change your automated payments to the new account.
- Pay annually. If you have the option and the budget to do so, it might be easier to pay your insurance premiums once annually instead of every month. You might even get a discount for doing so.
- Obtain a waiver of premium rider. Insurance providers may give you the option to pay an additional fee or higher premiums to add a premium waiver clause to your insurance policy. The waiver of premium rider is an optional clause that waives the premium, meaning you no longer have to pay your premiums, should the insured party become critically ill or disabled. The waiver may adhere to specific terms, such as expiring once the insured party reaches age 60 or 65.
Keep receipts of your payments and copies of relevant communications with your insurance provider, such as annual policy notices. You can likely choose to receive either paper bills or electronic copies of bills and receipts sent via email. Particularly if the records are electronic, you might as well keep them, and you can keep the more recent paper receipts as well. Electronic bank records may also be used to prove payment of premiums. If you receive notice of a missed premium or pending policy lapse, keep copies of the notices and all other relevant communications between yourself and the insurance company. Should there be a coverage dispute, you’ll have ample evidence that you kept up with your side of the bargain.
Check in With the Insurance Company
It’s worthwhile to check in with your insurance provider every so often to ensure that there’s been no coverage interruption. If you are the beneficiary of a life insurance policy held by an elderly relative, for example, you might want to check that your relative has not forgotten to pay their premiums. You may also be able to catch a clerical error before a triggering event causes the error to turn into a full-on coverage dispute.
Make Sure Your Notice Designations Are up to Date
California law requires life insurance companies to give policyholders the opportunity to designate another party to receive notice of missed premiums and possible policy lapse or termination. In fact, the insurer must notify the policyholder annually of their right to add or change their notice designations. Policyowners can modify their designations more often if they so choose, but the insurer must remind them at least once a year of their right to do so. The insurers are not permitted to terminate a policy for non-payment without notifying those designees well in advance of termination, in order to give all interested parties an opportunity to keep the policy alive.
Make sure that your designations are up to date. If you have changed your beneficiaries, if your designees have passed away or become incapacitated, or if you have other parties you’d rather rely upon to receive notice of a possible policy lapse (a new spouse, a new child, etc.), you can and should update your designations. Having updated designations ensure that you will not accidentally let your policy lapse should you become mentally or physically incapacitated, or otherwise forget to pay your premiums.
If You Miss a Payment
If you do miss a premium payment, do not panic. The insurance company cannot terminate your policy immediately because of one missed payment. They must notify you, as well as your designees, of your missed premium within 30 days of the premium becoming due and going unpaid. Moreover, they must issue a notice at least 30 days in advance of potential lapse or termination. Cumulatively, that means you have at least 60 days after a missed premium payment to pay the overdue amounts and keep the policy from lapsing. Your policy must remain in effect during this 60-day grace period.
Call an Experienced California Life Insurance Denial Law Firm Today for Help Protecting Your Policy and Your Loved Ones
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 savvy and skilled Los Angeles insurance denial lawyers at Gianelli & Morris. Call for a free consultation at 213-489-1600.