What Happens If You Miss a Life Insurance Premium Payment?

When you miss a premium, your policy enters a grace period, usually 30 days. During this window, your coverage remains active while you catch up on the payment. If you pay before the grace period ends, your policy continues as normal with no lapse in coverage.

What happens after that grace period depends on your policy type. Term life insurance has no cash value, so the policy moves directly toward lapse once you miss the payment deadline. Permanent life insurance (whole life or universal life) works differently because these policies build cash value over time.

Term life insurance provides coverage for a set period, and it doesn't accumulate cash value. If you miss a payment, your policy enters the grace period immediately. Pay within that window and you're back on track. Miss the deadline and your policy lapses, ending your coverage entirely.

Because term policies lack cash value, there's no cushion to cover missed payments. Your insurer can't pull from an internal account to keep the policy active.

Permanent life insurance, such as whole life and universal life policies, builds cash value over time. If you miss a payment and your policy has accumulated enough cash value, some insurers will automatically use that money to cover the premium.

The insurer provides an automatic premium loan using your cash value as collateral, plus compounding interest. Your coverage stays active, but your cash value decreases. If you never repay that loan, it reduces the death benefit your beneficiaries receive.

Not all permanent policies include this automatic loan feature, so check your policy documents or contact your insurer to confirm how your specific coverage handles missed payments.

A grace period is the time window after your payment due date when you can still make a late payment without losing coverage. It's a built-in safety net that prevents an accidental lapse.

Most life insurance grace periods last 30 or 31 days, though some insurers and states extend this to 60 or 90 days. California, for example, requires insurers to provide at least 60 days. Your policy documents will specify your exact grace period length.

During the grace period, your coverage remains fully active. If you die within this window, your beneficiaries still receive the death benefit. The insurer will deduct any unpaid premiums and associated fees from the payout, but the core benefit remains intact.

You'll receive a notice from your insurance company explaining that you've missed a payment and informing you of the amount of time you have to pay before the policy lapses.

A lapse occurs when you don't pay your premium within the grace period. Your policy terminates, and your coverage ends. Your beneficiaries won’t receive a death benefit if you die after a lapse.

A lapse affects more than just immediate coverage.

• Do you have term policies? All your premiums are gone forever. No refunds.
• If you locked in low rates because you were young and healthy, those rates vanish when your policy ends.
• New coverage requires new underwriting. If you have health problems now, expect higher premiums or limited coverage.
• Your insurer notifies you when the policy lapses. The notice lists reinstatement options.

Most insurers give you two to five years to reinstate after a lapse. The window depends on your company and policy type. Reinstatement brings back your original coverage. No new application needed. Most insurers require:

• A reinstatement application
• All missed premiums plus interest
• Proof you're healthy enough for coverage (health questions or a medical exam)
• Confirmation your health hasn't changed drastically

Reinstating beats buying new coverage. Life insurance rates climb with age. Your old premium costs less than today's rates. If your health has since you bought the policy, new underwriting means higher premiums or outright denial.

Prevent missed payments with these strategies.

1. Set up autopay: Link your bank account or credit card. Payments run automatically.
2. Pick a payment schedule you can handle: Annual payments mean one due date yearly. If you have a tight budget, monthly payments work better but give you 12 chances to forget.
3. Update your contact info: Insurers email and mail payment reminders. Outdated address? You miss the warnings.
4. Set phone alerts: Schedule reminders one week before due dates. Transfer funds or fix problems before the deadline hits.
5. Call your insurer when money's tight: Struggling to pay? Companies sometimes offer payment plans or temporary coverage cuts to lower your premiums.
6. Add a waiver of premium rider. This optional rider pays your premiums if you're disabled and can't work. The rider activates if you've been totally disabled six months or longer. Your insurer waives premiums and keeps your full coverage active.

Your policy's grace period, usually 30 days, gives you time to make up the payment and keep your coverage intact if you miss a life insurance premium payment. If your policy does lapse, reinstatement is often possible within two to five years, though you'll need to pay back premiums with interest and might need to prove you're still insurable.

The best approach is prevention. Set up autopay, keep your contact information current and know your policy's grace period terms. If financial hardship makes payments difficult, contact your insurer to discuss options before you fall behind.

We answer common questions about life insurance premium payments to help you understand how lapses and grace periods work.