A life insurance policy can be a lifesaver for many people, and keeping them current so the life insurance company has to pay out upon death is important. But there are times when the life insurance company says the policy lapsed and so there’s no coverage. That can be a problem in two ways: (1) for the person who was expecting to receive the insurance funds after the death of the person named in the policy, or (2) for the person who wants their beneficiaries to receive those funds after they die, but learn that the life insurance company says the case is closed.
The first thing to do in either of these cases is to contact an experienced life insurance law firm. Sometimes people despair, thinking they have no recourse to reinstate the policy or collect the death benefits. That’s often not true, and a knowledgeable attorney in that specific area can advise you on the next steps.
How Do Life Insurance Policies Lapse?
The obvious case is when someone stops paying for the policy as required by the life insurance company. That can happen due to either negligence (someone forgot or misunderstood the deadlines) or deliberately.
However, sometimes the fault is on the insurance company itself. States have strict and frequently changing rules and laws around life insurance policies. That means the companies spend a great deal of time updating their policies and communicating those changes with their customers and stakeholders. It’s not uncommon for something to fall through the cracks.
The company may not change their procedures to adhere to the latest laws, send updated notices to the people they’ve insured, or inform people that there’s a lapse coming in their policy.
Is There Supposed to Be a Grace Period if I Accidentally Let My Policy Lapse?
Yes. Insurance companies are required to give a grace period of one month from the date of lapse (which is the date the previous payment was due, but you didn’t meet it) to pay the premium you missed. If you pay within the one-month grace period, your policy is reinstated with no repercussions. But if you don’t pay within the grace period, your policy will lapse.
What each state requires life insurance companies to do when facing a policy about to lapse varies. But in general, life insurance companies have strictly regulated procedures they must follow in terms of notifying the policyholder and what they need to do if the policy lapses.
Some states require life insurance companies to only cancel a policy while the policyholder is still alive. That means if the policy lapsed because the policyholder died and missed the payment, the insurance company can’t cancel the policy and must pay out the benefits. But this isn’t true in every state.
How Do Insurance Companies Erroneously Let Life Insurance Policies Lapse?
There are many reasons an insurance company will erroneously cancel a life insurance policy:
- They didn’t send a premium bill on a time frame that has legal limitations.
- They sent the bill to the wrong address.
- They didn’t keep the policy intact during the legally required grace period or used a grace period that was shorter than legally required.
- They didn’t provide adequate communication to the policyholder in a number of situations, including:
- No lapse notice was sent, which violated state laws.
- No annual notice reminding policyholders to name a third party that would receive bills and lapse notifications if the insurance company couldn’t reach the policyholder.
- They provided no information or inadequate information when the policyholder changed jobs or retired. That information would include important details about converting the life insurance policy from a corporate or group to an individual policy or explain what the policyholder’s portability rights are.
How Can I Get My Lapsed Life Insurance Policy Reinstated?
As noted above, if your policy is about to lapse because you missed a payment, paying that missed premium within the one-month grace period is the fastest and easiest way to have your policy reinstated. But it’s not the only way, especially if the insurance company is in the wrong, not you. It’s strongly advised to work with an attorney who has experience in this area and knows what errors to look for and how to address them legally.
But if you don’t believe you were at fault, contact us to find out your options. We can go through your options with you, including explaining the denial letter and its various terms; research what your rights and options are under the terms of the policy, state law, and whether or not the insurance company complied with relevant laws; prepare a legal brief to put the insurance company on notice that you’re appealing the denial; and, perhaps most importantly, have experience with what kinds of tactics the company might use to try and continue denying your claim. In addition, we have the resources to investigate how the insurance company communicated with the policyholder and if there are missteps on their part.
What Should I Do if the Life Insurance Company Claims My Policy Lapsed?
Call us as soon as possible at 855-553-9010 to request a free case evaluation. Our law firm has more than 20 years of experience in working with denied and delayed Life Insurance and Accidental Death & DIsmemberment claims for all sorts of reasons. Our life insurance legal team has appealed and been involved in more life insurance claim delays and denials than any other firm in the U.S., and we have a strong track record of success. We want to help you get the life insurance benefits due to you or your inheritors.
