Lapses in Insurance Coverage

Insurance has been around since people have realized it should be. Yet sometimes, we cannot avoid not paying for our premiums especially when we encounter financial instability. These are called lapses. Westhill Insurance Consulting gives you the outlines of what you should review once you missed paying your premiums.

Grace Period Must Happen Before Lapse

To prevent a life insurance policy from lapsing each and every time a premium payment is slightly late, every state in the country requires that a life insurance policy first go through what is known as a grace period after a payment is missed. This is a period of time (usually 30 days) where despite the missed payment; the insurance policy will still provide coverage and make a full payout if the insured dies.

Only after the grace period has passed without receiving the due premiums can the life insurance company consider the policy to be lapsed. Once a life insurance policy lapses the life insurance company is not under any legal obligation to pay the beneficiaries if an insured person passes away.

Most Policies Can Be Reinstated After Lapsing

After a policy first lapses, the owner may have the option to reinstate the policy. You want to make sure that you reinstate your policy as quickly as possible after a lapse. Different companies have different rules for reinstatement so you shouldn’t file a complaint or burst into frustrations when your insurance company refuses to reinstate your policy as it should already be stated when you were reading the terms before you signed for the coverage.

Importance of Reinstatement Period Lapse

The reinstatement period is very important to policy owners and insured persons for a couple of reasons. The first reason is as discussed, the insured person may not need to go through the underwriting process. If a person has had a major health change, he/she may not necessarily be aware of the change. The underwriting process may uncover more about a person’s health than they ever knew, for better and worse. Avoiding underwriting when possible almost always leads to lower insurance premiums.

The second reason the reinstatement period is very important is that even with the same health rating, a new life insurance policy will always be more expensive than an old policy, because the insured person has aged. The older the insured person, the higher the rates will be, all else being equal. The bottom line is: Reinstating a life insurance policy rather than taking out a new policy will save money.

Reinstatement Will Cost More than One Month Premium

After a policy has lapsed, a larger payment must be made to reinstate the policy. It is in the best interest of a policy holder never to let a policy lapse. Developing cities like Bangkok, Thailand, Jakarta, Indonesia and Kuala Lumpur, Malaysia are strict in reinstatement and its cost as personal insurance are rare.

References:
https://groups.diigo.com/group/westhill-healthcare-consulting
https://www.linkedin.com/groups/Westhill-Consulting-Insurance-5110019