In the current economic climate, it is understandable that people are failing to pay their life insurance premiums but what are the consequences of this? What happens to your life insurance policy if you cease paying the monthly (or in some cases yearly) premiums?Life Insurance companies are like any other profit making business in that their primary aim is to return a profit, in most cases, on behalf of their shareholders and to this end cannot continue to keep cover in place if you are not paying the premiums required. However, most insurance firms are sympathetic to your needs and will allow you a period of grace before taking any actions.
In the first instance, you will receive a letter from the insurance company advising you that they have not received your payment and outlining the next actions if you continue to fail to pay your premiums as directed. In most instances a direct debit instruction letter will accompany the letter given in many cases the failure to pay the life insurance premiums is due to a simple banking error and can be easily remedied through the completion of the bank mandate.
The letter should also provide you will contact details for the insurance company concerned in which you are able to discuss your policy with a customer services representative.
Therefore, what happens if you continue to not pay your life insurance contributions? The Life company will allow you to repay any outstanding premiums should the problem be a monetary one thereby bringing your plan up to date. Under normal circumstances missing 2 or 3 premiums will not cease the life cover provided however, you should contact the company to arrange to bring your plan up to date. If you ignore the reminder letters following approximately 3 missed payments you will receive further confirmation from the insurer that your life insurance policy will lapse and no cover will be provided.
If your policy is classed as a Term Assurance plan then following the termination due to no payment of premiums no further cover will be in place and no refund of premiums will be due. This is because Term Assurance benefits are provided upon a 'pay as you go' basis and no value ever accrues within the policy. Some other forms of life protection plans such as Whole of Life can sometimes accrue a value, although in many cases any value within the plan can be used to offset the missed premiums until such time as there is no money left within the plan and this will also, cease.
Life Insurance policies offer valuable protection against the risk of premature death to provide support to your dependents when they require it th most. It is therefore, worthwhile ensuring that continued cover can be sustained even during hard times, perhaps other items in the family budget can be reduced to cater for the adverse financial situation. Consider the financial priorities you shoulder given the failure to pay your life insurance policy means that you will be left without this valuable cover.
By : Jonathan Grigson
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