Life happens, and people either forget to make payments or they can’t make a payment. With life insurance there are some protections in place if that happens. Every life insurance policy has a 30 day grace period to catch up on a missed payment. If death occurs during a grace period, the missing payment is deducted from the death benefit. If payment isn’t made within the grace period then a statement of good health must be provided to the insurance company in order to reinstate the policy. Fortunately, most policies require automatic payment from a checking account or credit card if the policy owner opts to make monthly payments. Autopay greatly reduces the number of missed payments. Insurance companies will allow payments to be mailed in if they are on a quarterly, semi-annual, or annual basis. Very few companies allow mailed payments on a monthly basis.
Additional protections are available for whole life that aren’t available for term life. Whole life uses the plan’s cash value to extend coverage if premium payments stop. A loan can be taken against the cash value in order to make premium payments, or a nonforfeiture option can be invoked. I will discuss nonforfeiture options in a later post.