Life Insurance Lapse


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 Lapse In Coverage

Federal and state laws control life insurance lapse. Life insurance claims involving non-payment of premiums are complex. Federal and state laws are constantly changing. Life insurance companies have a duty to constantly update its contracts and practices in accordance to new laws. Additionally, life insurance companies must comply and adjust to case law. Unfortunately, not every insurance company is as diligent or knowledgeable about laws. Some life insurance companies may fail to adjust their policies. Some insurance companies may have neither adjusted nor adopted new regulations, failed to inform insureds of an upcoming lapse, or failed to send required premium-due notices to an insured’s correct address.

A mistake made by a careless life insurance company may cause the life insurance company to overturn its denial. Additionally, an appeal may reveal the life insurance company’s failures and force the insurer to pay for your life insurance 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

What should I do if my life insurance policy has lapsed?

Regular payment of your life insurance premiums (monthly, semi-annual, or annual) will maintain your life insurance policy in full force. When an insured misses a payment(s), the life insurance company is required to give an insured a grace period to catch up on their premium(s) (31 days). This allows an insured to repay any delinquent premium(s) and reinstates thier policy. However, if an insured fails to submit a premium payment during their grace period, the insured’s life insurance coverage will lapse due to non-payment of premiums.

How does an insured request reinstatement?

After a policy lapse, your insurance company will likely require you to provide additional answers to a health questionnaire and repay your delinquent premiums. Every insurance company is different, and therefore, reinstatement varies by insurance company. The life insurance company will most likely require the insured to repay any delinquent premiums. Typically, the insurance company has a certain time frame to request a reinstatement.

What are reinstatement requirements?

In accordance with the law, a life insurance company must notify an insured of any imminent lapse in their policy. To reinstate your life insurance policy, you may be required to pay additional penalties beyond your delinquent premiums. Some life insurance companies require you to pay interest, in addition to all unpaid premiums. The life insurance company may also require you to retake a medical exam. If your health has decreased since the original medical evaluation questionnaire, your life insurance company may increase your policy premiums.

How much does it cost to hire and life insurance claim lawyer?

Our law firm represents life insurance clients on a contingency fee basis. Plainly, this means that our firm is paid our attorney’s fees and costs out of any settlement, judgement, or trial award received on your behalf. If we are unable to resolve your claim, you owe us nothing.

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