Life Insurance Lapse

Overview

Life insurance lapse can occur when an insured fails to pay premiums for a life insurance policy. Life insurance lapse happens more than you think. When a life insurance policy lapses due to unforeseen circumstances or by way of an insured’s accident or mistake, it’s unfair to the beneficiaries and the insured. The insured may have paid their life insurance policy policy premiums for years, yet the insurance company will deny a beneficiary’s claim relying on insurance lapse. Many beneficiaries and insureds will not investigate their insurance company’s lapse claim. The insurance companies understand that a claim denial causes several problems.

When a beneficiary or insured attempts to resolve an insurance claim with a life insurance company, the insurance company may ask for certain information. Next, the insurance company will investigate your claim and attempt to find an exclusion or law to deny your claim based on the responses you previously provided. Sometimes, even the most seemingly solid life insurance claims may be denied. Life insurance companies understand that you may not hire an attorney if your claim is denied. Furthermore, the insurance company knows you may not hire an attorney if your appeal is denied. The life insurance company may try to frustrate and tire out the insured and/or beneficiary, the insured and/or beneficiary is more likely to quit pursuing the claim.

Notice Of Non-Payment Of Life Insurance Premiums

Non-payment of life insurance premium(s) can have long lasting consequences. A lapse in a life insurance policy may cancel the policy altogether. An insurance lapse may go unnoticed by the policyholder. If the lapse does go unnoticed, the beneficiary may not even realize it. That’s why the law requires an insurer to send a timely, accurate, and correctly addressed life insurance cancellation notice. When a beneficiary has been denied a life insurance claim due to non-payment of premiums, the beneficiary may still be entitled to claim proceeds if the beneficiary can prove that the life insurance company failed to properly send and notify of the insured of the policy’s imminent cancellation.

Life Insurance Lapse Laws

As discussed above, case law governs the procedures for life insurance notice requirements. Life insurance companies must follow specific steps and procedures during a policy lapse period to terminate an insured’s policy due to non-payment of premiums. In some states, the life insurance company has the burden of proof. The life insurance company must prove and establish that its cancellation occurred prior to the death of the insured. The insurer has the ability to create a presumption that the insured received a notice of cancellation. The insurer does so by outlining its company procedures when delivering such notice, ensuring the notice is sent to the appropriate person(s) and address. Moreover, the life insurance company can also provide proof of its actual correspondence and delivery of such notice.

The law presumes that the insured received the notice of cancellation if the life insurance company sent the notice via mail to the insured’s last known address, even where the insured never received the insurance company’s actual notice. A beneficiary may challenge the cancellation because of how the notice was mailed and/or delivered. If the beneficiary successfully proves that the notice was sent incorrectly, the insurance company may be required to pay the claim. A life insurance law firm can draft a letter to the insurer to request and determine how cancellation and notice was delivered and mailed.

Frequently Asked Questions