Trouble Paying Life Insurance Premiums

If you have universal or another permanent life insurance policy, even a single late payment can have a significant impact on the policy’s benefits.

Some types of policies are very sensitive to late premium payments. In fact, if you have a guaranteed policy and you are more than one month late on your payment, it may no longer be guaranteed.

If you continue to fail to pay your life insurance policy, it could lapse. At that point, the beneficiary or beneficiaries you specified could wind up with nothing in the event of your death.

If premium payments are stopped before you die, many life insurance companies will switch a permanent account into one of the following two alternatives:

  • An Extended Term is when the life insurance company takes the cash value of a permanent policy and converts it to a term policy. The death benefit will remain in place for as long as the cash value pays for the policy. In the event the policy lapses and the extended term expires before the insured dies, the beneficiary receives nothing.
  • A Reduced Paid Up means a permanent policy remains in effect, but its death benefit is reduced.

When in doubt, if you think you’re going to be late on a payment, you should contact your carrier. Many companies may have a 30 to 60 day grace period for late payments, without it affecting the policy’s guarantees.