When you purchase insurance coverage, you have a premium. Any insurance, such as health or life insurance, have premium pricing based on the coverage amount, the age of the insured, and the length of the policy. These premiums are payable based on the arrangements set up when you purchase your policy. You might pay your premiums every month, every six months, or once a year.
The premiums pay for the cost of your coverage. When you purchase the policy, you sign an agreement that indicates the due date for your premiums. If there is a grace period, it will be noted. As an example, your due date might be the 20th of each month. You might have a five-day grace period, which means you can pay your premium plus a late fee within five days of the date and not have a lapse in coverage.
If you don’t pay your health insurance premiums, your insurance coverage will lapse and you will not have coverage when you need it; you’ll have to pay for your medical bills out of pocket. If someone fails to pay his or her life insurance premiums, and he or she dies, then their family cannot claim the life insurance benefits, which can be financially devastating.
What If I Can’t Pay My Premiums?
We all face financial difficulties, such as unexpected expenses or emergencies. If you find yourself in this situation and realize that you can’t pay your insurance premiums, you should consult with your insurance agent. They can make recommendations regarding how to handle the situation. Here are some options regarding your inability to pay your life insurance premiums:
If you have a term policy and you stop paying your premiums, your insurance coverage will lapse.
If you have a permanent life insurance policy or a whole life policy, you have options:
- You can cash out the policy. Cashing out your policy means you can stop paying your insurance premiums and then collect the cash savings that are available. You will not be covered by the life insurance policy anymore, but you can save some of your policy proceeds using this approach. You might have to pay taxes on a portion of the cash value if the sum you receive exceeds the amount you paid in for premiums.
- You also have non-forfeiture options. There could be a reduced paid-up option for your life insurance. Using this approach, you can stop paying your premiums and have no cash savings but keep a reduced death benefit. In some cases, you might be able to convert the permanent life insurance policy to an extended term life policy that is for a set time based on your policy’s accumulated cash savings.
- The third option is that the insurance policy will lapse. You can check with your insurance agent to determine if you can reinstate the policy. Some insurers will allow this if you pay the premium and reinstate the policy within a specific timeframe after it lapsed. To do this, you might have to pass a physical exam and pay back any premiums that you would have paid during the time that the policy wasn’t in force. Annual premiums for reinstating your old policy might be less expensive than the rates for a new policy with comparable coverage.
The Importance of Insurance Coverage
Life insurance and health insurance coverage are both essential. Even if your coverage lapses, you should arrange to pay your premiums and get coverage reinstated or purchase a new policy as quickly as you possibly can. Your insurance agent can help you determine the best way to proceed through this kind of situation.
To learn more about life insurance or health insurance, contact the professionals at HealthQuoteInfo.com at (855) 614-5057. Our licensed insurance experts will be happy to answer any questions you have.