by Guest » Thu Nov 15, 2012 02:04 pm
I am unable to continue payments on my life insurance policy? What will happen if I stop making the payments for a few months and continue thereafter? I don't want to go for cancellation or settlement even.
Posted: Thu Nov 15, 2012 04:46 pm Post Subject: discontinue paying life insurance premiums
Your life insurance policy will lapse, if you stop paying the premiums. However, you can consult your insurer and tell him about your financial hardship, and see if you can get a waiver for few months from making the payments.
Posted: Thu Nov 15, 2012 05:20 pm Post Subject:
Adam does not know what type of policy you have and he cannot make the statements he has made. His posts are full of dangerous misinformation.
The answer to your question, Jacob, is: it depends.
It depends on whether you have a cash value life insurance policy or a term life policy. If the policy is term life, failure to pay the premiums will result in a policy lapse. With continued good health, it will be possible to restore the coverage within a certain period of time (often three years) by paying all of the missed premiums (sometimes with interest added) and submitting an application for reinstatement.
If the policy is some form of cash value insurance -- whole life, universal life, variable universal life -- and if there is sufficient cash accumulation value, the policy will continue until there is no remaining cash value available as collateral for the "automatic premium loan" the company will make. That could be anywhere from a month or two to several years.
Contact your agent or the insurance company's policyowner services department for the correct information.
Posted: Thu Nov 15, 2012 06:42 pm Post Subject:
Max, there does not need to be an automatic premium loan provision. A policy can lapse while there is still a cash surrender value.
Posted: Thu Nov 15, 2012 10:14 pm Post Subject:
there does not need to be
OK, there does not need to be an automatic premium loan provision in the sense that it is not required by law, but I have not seen a modern whole life policy that does not have an automatic premium loan provision -- it's self-serving as far as the insurance company is concerned, doesn't cost a penny to include it, and it does provide a valuable benefit to the insured by preventing an unintentional lapse -- but, I suppose, that doesn't mean some insurance company somewhere is still issuing policies in America without one.
Universal life does not, by design, require one, since all policy charges come from the cash accumulation until exhausted (or depleted to the point that there is not enough value to make the next payment. And we know that UL policies can lapse even when premiums are paid -- quite the opposite of whole life which cannot lapse as long as premiums are paid.
However, all states have a default nonforfeiture law in place (to prevent insurance companies from lapsing policies and absconding with the cash value). If a policy were to lapse with cash value remaining, the contract would continue, in almost all states, under the extended term option, which provides the full death benefit for a limited number of years and days into the future based on the cost of single premium term insurance and the available cash value.
Regardless, the policy may be reinstated upon a showing of good health and insurability, withing the time provided for in the contract (typically three years, but I've seen up to ten offered by a few companies), and with the payment of all missed premiums (and interest when required).
Posted: Sat Nov 17, 2012 01:21 am Post Subject:
With most whole life policies, an owner can choose whether to include an automatic premium loan feature on it or not. It is a simply check on the application. Like you said, it costs nothing.
I am pretty sure that "some company" includes MassMutual, Northwestern Mutual, Guardian, NYL, etc. It's just that it is rare for the agent to not check that box.
The APL is very useful in terms of stopping an inadvertent lapse. On the other hand, it isn't so good if a person will ultimately just lapse the policy.
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