Lapses and Surrenders

If you miss a payment on a life insurance policy, you normally have a 30-day grace period in which to make the payment. If you die within the grace period, your beneficiary will receive the benefit minus the overdue payment. If you miss the grace period, the policy will lapse. That means your beneficiaries will not receive benefits when you die.

However, depending on how long you held a policy before it lapsed, the policy may still have value to you. The cash value of a lapsed policy can still be used as collateral for a loan. You also may be able to reinstate the policy. Most policies can be reinstated within five years of lapsing as long as overdue premiums are paid and loans against the cash value are satisfied. Most companies require proof of insurability, however, reinstating a lapsed policy can be less expensive that purchasing an entirely new policy.

If you decide not to reinstate a lapsed policy and to cancel it instead, you are still eligible to receive the cash value of the policy. If the cash value exceeds the amount you paid in premiums, the amount in excess of premiums is likely to be subject to taxes.

Publications and Resources

What You Should Know About Life Insurance. An ACLI guide to help you choose the right life insurance products to meet your needs.

Tips on Buying Life Insurance (PDF). Choosing a life insurance product is an important decision. As with any major purchase, it is important to understand your family's needs and the options available. Use this list of buying tips to help you choose.

State Insurance Department Directory. The State Insurance Department Directory, with contact information for 50 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands. Includes names and phone numbers for key personnel and specific subject contacts.