Though the rules governing this do vary from state to state, most life insurance companies will allow you to miss a premium and not immediately be cancelled. This is known as a “Grace Period” and a policyholder is usually given at least 30 days to bring his or her account current before facing cancellation and loss of life insurance benefits.
If you fail to make the payment within the grace period, what actually happens next is based on the type of life insurance policy you own. If you have a basic Term Life insurance policy, it will be lost if it is not made current after the grace period passes. You typically will not get any money back from premiums paid thus far. If your have a Permanent Life insurance policy such as Whole Life insurance that has been earning cash value, most life insurance companies will transfer your owed premium from your equity account. This will keep the policy in effect for as long as you have cash value left to cover the premium – it is in this way that Permanent Life insurance policies are often said to have the ability to “pay for themselves.” However, if you run out of cash value, and you do not pay the premium, the policy also will lapse. When shopping for life insurance it is good idea to think about taking any options or riders that are often offered to keep paying your premiums if you become ill or disabled and cannot work.
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