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 Posted: Wed Nov 25, 2009 9:37 am Post subject: failure to pay life insurance policy premiums |
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Would my failure to pay life insurance policy premiums (within due date) allow me to retain coverage? I'm currently going through a financial turmoil and not sure whether I'd be able to make it within time.
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Clivedixon
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| Posted: Wed Nov 25, 2009 11:33 am Post subject: |
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| Quote: | | Would my failure to pay life insurance policy premiums (within due date) allow me to retain coverage? |
You need to contact your agent, it depends on the policy.
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Lori
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| Posted: Wed Nov 25, 2009 6:41 pm Post subject: |
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Typically, you'll have a 30 day grace period. If you die during the grace period you would be covered. There is usually a second 30 day period in which one could keep their insurance by paying the premium. However, during this 2nd 30 day period, if you die, a benefit won't be paid.
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alfoarm
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| Posted: Wed Nov 25, 2009 8:07 pm Post subject: |
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Clive, if you can't afford the premium right now you may want to consider reducing your coverage or looking around to see if you can find another provider with better prices.
You can always increase your cover again later - you don't want to get a history of policy cancellation due to non payment of premium.
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heidrek
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| Posted: Thu Nov 26, 2009 6:55 am Post subject: |
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While signing up my agent probably told me that if I ever default in payments my carrier would offer me with policies that fetch lower premiums and get things adjusted accordingly. Now, I'd need to ask him regarding that thing once again.
| Quote: | | you don't want to get a history of policy cancellation due to non payment of premium. |
Does that affect my credit score by any chance?
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Clivedixon
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| Posted: Thu Nov 26, 2009 1:54 pm Post subject: |
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| Quote: | | Does that affect my credit score by any chance? |
no I don't see how it could affect your credit score..more likely would (only) affect your insurablity, or your carriers willingness to write more policys (that carrier only)
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Lori
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| Posted: Thu Nov 26, 2009 8:10 pm Post subject: |
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Never tell someone that they can increase their coverage in the future. Unless there is a guaranteed insurability rider in the policy, they can only increase coverage in the future if someone's willing to insure them.
Cancelling a policy won't impact your credit score.
It can impact his insurability and other carriers willingness to write more policies. The reason for this is that it often takes 6-7 years for a company to break even financially on a sale.
That being said, if this is just a one time event, it won't make a difference.
Do you have a current insurance need? If so, don't cancel the policy. Find a cheaper alternative.
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ajflkaruii
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| Posted: Fri Nov 27, 2009 6:31 am Post subject: |
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Didn't quite get the 'break-even' thing in this regard. Yes, I'd need insurance. Do I go for a cheaper alternative with the same carrier? Or would that get a negative impact on my insurance history?
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Clivedixon
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| Posted: Fri Nov 27, 2009 12:20 pm Post subject: |
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| Quote: | | Do I go for a cheaper alternative with the same carrier? Or would that get a negative impact on my insurance history? |
Clive, how long have you had this policy? What 'type' of life policy is it? Have you talked to your agent? I'm no life policy expert. However, there are life policys that have a built in provision, that if you stop making your premium payments, you have enough cash value built up that it will make your premium payments for 'x' amount of time. I know four of the ones I have are like this (me, husband and two adult kids)...every time they send a statement it says something like, 'if you cease making your premium payments your policy will not cancel for non-payment until blah blah date", in my case several years. So check on that...
Do you have all your insurance with one agent? What is your insurability? Meaning how old are you? Do you smoke/chew? Is your health 'perfect'? If you are in anyway a higher risk, I'd be sure I got this 'new' policy written and in force before I let this other one cancel.
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Lori
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| Posted: Sun Nov 29, 2009 9:55 am Post subject: I am a Life Insurance Expert! |
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Clive
There is both good and bad information being passed around in this thread. The bad information will kill you. The good information has varying degrees of accuracy.
First thing is, how old are you, what type of policy do you have now, and how long have you had it? If you have any type of [non-universal] cash value policy, it will have an "automatic premium loan" provision that allows the insurer to take money from the cash accumulation to pay the premium if it has not been paid by the end of the grace period (30-60+ days). The loan does not have to be repaid (although it should be), and the principal and accrued interest would be deducted from any death benefit payable.
UL policies do not need an automatic premium loan provision because the contract already states that all costs are taken from the cash accumulation every month, whether a premium is paid or not (if you pay a premium, it goes into the cash accumulation first, interest or gains may be added, and then the expenses are deducted). UL forms of insurance do not require a premium to ever be paid, except the first one to start the contract.
But all of that only works if you have any cash value, and it stops working when you don't have enough. At that point, you'd get a lapse notice from the insurer telling you that you have 30-36 days to pay a premium or your policy will lapse. To reinstate a lapsed policy, you have to prove insurability.
Which brings me to a serious point that some really BAD information has been given on: That if you lower you insurance amount to reduce the premium, "you can always increase your coverage again later." If an agent makes that remark, turn and run. It's not entirely true.
Some policies do include riders that will allow you to purchase more insurance at later ages without proof of insurability -- but most don't. You generally pay extra for the rider, whether you ever use it or not. And you'll pay an extra premium whenever you take the increase(s).
Insurance premiums don't affect your credit rating unless they prevent you from paying your other bills. Frequently dropping one policy in favor of another does not affect your insurability, but it could cause you to be rated substandard, resulting in a higher premium. Asking an insurer if you can convert to a less expensive form of insurance does not affect your insurability, but most policy conversions are costly because you're older and you pay a higher cost of insurance that often negates any saving from other economies.
If you're thinking of replacing your insurance with something less costly, you need to qualify for it first before you even begin to think about cancelling what you already have. If your existing insurance is a cash value policy of any type, and you've had it more than three or four years, you may be exposed to "surrender penalties" or other charges that wipe out any cash you were thinking of taking with you. Less time than that, and you probably have so little cash value that it just becomes an expensive lesson in "Life Insurance 101" to cancel and walk away empty handed.
Your lowest cost alternative will always be a form of straight term insurance. One-year term (ART) is the least expensive, but it costs more each year as you get older. Longer terms result in higher premiums. Always look for a true level-premium, level-term policy (death benefit and premium remain the same from year to year, until the renewal point) -- meaning that if it's a 20-year level-term policy, there will not be any change in the premium or death benefit during the first 20 years. But expect premiums to double or even triple at renewal. And term insurance has no cash value.
If you have more specific questions, please feel free to email me for 100% honest answers.
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