What if the Insured Party Died During the Life Insurance Grace Period For Policy Lapse?
One of the most common justifications for denying life insurance benefits is that the policy lapsed due to nonpayment of premiums. Insurers have the right to terminate policies that have gone unpaid for a sufficient period. Policyholders and beneficiaries, however, also have rights, including the right to a grace period before policy lapse. What happens when a premium goes unpaid and the policyholder dies, but the grace period has not yet passed? Is the insurance company still required to pay out benefits? Read on to learn about the grace period and insurance payouts. If you are facing resistance when trying to collect your life insurance benefits, call a dedicated California life insurance denial attorney for help recovering the benefits you are due.
California’s Grace Period for Life Insurance
Insurance companies do not terminate your policy immediately upon the first missed premium payment. Instead, you’ll have a certain time during which you are in arrears but your policy remains active. That period is known as the “grace period.”
California law requires life insurance companies to provide a minimum grace period before terminating policies due to non-payment. Insurance companies must notify the policyholder as well as other designees (chosen by the policyholder) in the event of a missed premium payment and must notify those parties at least 30 days in advance of a pending policy lapse. Altogether, the insurance company must give the parties at least 60 days’ grace.
At any point during the 60-day grace period, the policyholder can pay the overdue balance and resume coverage. So long as payment occurs during the grace period, there is no policy interruption; there’s no need to, for example, apply for policy reinstatement or get a new medical examination. Upon payment, the same policy coverage will continue to apply.
If the Insured Party Dies During Grace, Benefits Are Due
If a policyholder fails to make payments during the grace period, the insurance company can terminate the policy for nonpayment of premiums. If the insured party dies after the policy has lapsed, they are no longer covered and the insurer may refuse to pay out benefits.
During the grace period, however, the policy remains active, even though payments are overdue. If the insured party dies during the grace period, the insurer is required by law and contract to pay out to the proper beneficiaries in accordance with the policy.
To recover under the policy, the beneficiaries may need to demonstrate that the death did actually occur during the grace period. Proof can come in the form of medical reports, autopsy reports, police reports, and other documentation. If the beneficiaries cannot prove the death occurred during the grace period, the insurer might claim the death occurred after grace and after policy lapse.
So long as the beneficiaries can prove the death occurred during the grace period, however, the insurer must pay out. The insurance company will deduct the amount of any outstanding premiums from the life insurance payout, but they must otherwise issue benefits according to the policy.
Call a Dedicated 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 unreasonably denied, or if you have otherwise been subjected to bad faith insurance conduct, fight for the coverage you are owed with the help of the accomplished and diligent Los Angeles insurance denial lawyers at Gianelli & Morris. Call for a free consultation at 213-489-1600.