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.

• With term policies, all the premiums you've paid are gone. You don't get that money back.
• If you qualified for favorable rates based on your health or age at the time of purchase, those rates disappear with the policy.
• Getting new coverage means going through underwriting again. If your health has changed, you could pay more or have coverage limitations.
• Your insurer must notify you when your policy officially lapses. The notice will explain your options for reinstatement if you want to restore the policy.

Most insurers allow reinstatement within a certain window after a lapse. The period ranges from two to five years, depending on the company and policy type. Reinstatement lets you restore your original coverage without starting over with a new application.

Reinstatement requirements vary, but most insurers ask for:

• A completed reinstatement application
• Payment of all missed premiums plus interest
• Evidence of insurability (proof that you're still healthy enough to qualify for coverage), which includes health questions or a medical exam
• Verification that your health hasn't changed drastically since the original policy

Reinstating often costs less than buying a new policy. Life insurance rates increase with age, so your original premium from years ago is lower than what you'd pay for new coverage today. If your health has declined since you first purchased the policy, new underwriting will result in higher rates or denial.

These strategies help prevent missed life insurance payments.

1. Set up automatic payments: Most insurers offer autopay directly from your bank account or credit card. Once enrolled, payments process without any action on your part.
2. Choose a manageable payment schedule: Annual payments mean just one due date per year. If cash flow is tight, monthly works better, but you'll have 12 opportunities to miss a payment.
3. Keep your contact information updated: Insurers send payment reminders and late notices. If your email or mailing address is outdated, you won't receive these warnings.
4. Set calendar reminders: Add alerts a week before each due date. This gives you time to transfer funds or address any issues before the deadline.
5. Communicate with your insurer during hardship: If you're struggling financially, call your insurer. Some companies offer flexible payment arrangements or allow coverage adjustments to reduce premiums temporarily.
6. Consider a waiver of premium rider. A waiver of premium rider is an optional add-on that covers your premiums if you become disabled and can't work. After you've been totally disabled for six months or more (exact timing varies by policy), the rider kicks in, and your insurer waives your premiums while maintaining your full coverage.

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 answered frequently asked questions about life insurance premium payments to help you understand how lapses and grace periods work.