If you have taken the sensible step of arranging life cover you will already be aware of the potential financial security that decision will provide for your family.
Any sort of life insurance policy takes the form of a financial contract between you and the insurance provider and there are clear consequences to consider if you fail to keep to the installment schedule.
It should be noted that a term insurance policy is not dissimilar to car insurance, for example, where your coverage ends if you allow the policy to lapse by not making the payments that are due.
Here is an overview of what it means and what happens if you don’t pay a life insurance premium.
A second chance to put things right
First of all, it is fair to say that most insurance companies are fairly understanding and accept that there are certain circumstances that might prevent you from making the regular payment when it is due.
It is most unlikely that the insurance company will cancel your term insurance policy as soon as you miss or default on a payment and it is common for them to contact you and request that you make a payment to bring the policy up to date within a certain time period.
If the insurance company gives you thirty days to sort the situation out, for example, it is important to note that you will still be covered during that grace period.
Bad news for your credit file?
You might also be concerned that missing a life insurance payment could have an adverse effect on your credit score.
A life insurance contract is viewed differently to a loan agreement and your missed payment won’t be reported to the credit bureau or affect your rating.
If you don’t make the payment within the grace period the insurance contract will simply be canceled and you will no longer be covered.
Is there any way back?
There can be reasons why you are unable to make the payment due, such as losing your job, and that means there may be an unavoidable situation where your policy lapses.
Having life cover in place is a valuable and justifiable aspect of your financial planning and you may well decide that you want that protection again even after the policy has lapsed through non-payment.
The good news is that a good number of insurance companies will consider allowing you to apply for reinstatement of your life cover benefits.
Expect them to ask you to make a declaration about your health and tell them about any changes since you last had coverage if there has been a period of time since your policy lapsed.
Obviously, the point to bear in mind is that if you miss payments and don’t take any remedial action you will no longer enjoy the benefits that come with having life insurance and that means your family could be left struggling financially without that safety net to take care of the bills.
If you can, the sensible strategy will always be to try and maintain your coverage by making your monthly payments on time.