How To Revive My Lapsed Life Insurance Policy?

Life insurance should be part of any financial plan. That being said, it is a cost that can become a bit much when money gets tight as it has in the last few years of the Great Recession. When you stop paying on a policy, you let it “lapse”. Is there any way to revive it? Let’s take a look.

A life insurance policy is a contract at its very core. You agree to make payments to an insurance company in consideration of certain benefits such as the payment of a death benefit should die. In turn, the insurance company agrees to provide those benefits in consideration of being paid premiums on a pre-set schedule. If either party fails to live up to their promise, they are considered in breach of the contract.

In this case, we are looking at a situation where you, the buyer, stops paying the premiums. This is a contractual breach. Instead of creating a situation where there are thousands of lawsuits in which a life insurance company is suing policy holders, the law now just calls for the insurance policy to be terminated. Known as a lapse, the insurance company gets to keep all the premiums you paid and no longer has to pay out anything even if you die.

So, do you have any options once a policy lapses? Yes, you do. The first is the 30 day revival period. Most policies allow you 30 days to get the missing payment in to revive the policy. Do that and you will be fine. What about a longer lapse? What if you lose your job and simply can’t afford to make the payment? Six months later, you are employed again and have the money. Can you revive the policy? Yes, but it will cost you. Depending on the state you live in and the terms of the policy, you can have up to five years to revive a policy after it lapses. That is the good news. The bad news is you are going to have to pay all the back premiums. That can be a princely sum and, in many cases, makes it practically impossible to revive the policy.

Letting a policy lapse is usually a really bad move. If you can’t meet the premium obligations, trying to sell it is often worth a go. There are investment groups that buy such policies. The amounts they will pay vary greatly, but any amount is better than just letting the policy lapse.

Barry Milton writes for UFCAmerica.com – where you can learn more about life insurance and life settlement insurance options.

Filed Under: Life Insurance