Life insurance is one of the most important ways families plan for financial security after the death of a loved one. In New Jersey, many people rely on life insurance to help cover funeral costs, pay off debts, or provide for their family’s future. But what happens when a life insurance policy lapses? A life insurance lapse occurs when the policyholder stops paying premiums, causing the policy to become inactive. This can be devastating for beneficiaries who were counting on the insurance payout. Understanding your legal options if you are a beneficiary facing this situation can make all the difference in securing the financial support you were promised. At, Trief & Olk, we are here to guide you through the legal process and help you navigate the complexities of your case.
What Does It Mean for a Life Insurance Policy to Lapse?
A life insurance policy can lapse when the policyholder fails to make the required premium payments on time. Life insurance companies often allow a grace period, which can range from 30 to 60 days, where a missed payment can still be made without the policy lapsing. If the payment is not made within this grace period, the policy can terminate, meaning the coverage is no longer in effect. Once a policy lapses, the insurance company may refuse to pay out any benefits when the insured person passes away.
This can be a devastating blow to beneficiaries, especially if they were relying on the life insurance proceeds for critical financial needs. Many people don’t realize that even if the insured had been paying premiums for years, a missed payment can cause the policy to lapse and put all that money to waste. For beneficiaries in New Jersey, it is important to know that you still have legal options even if the policy has lapsed.
Why Do Life Insurance Policies Lapse?
Life insurance policies may lapse for several reasons. Sometimes the insured may simply forget to make a payment or may not receive a bill on time. In other cases, financial hardships may prevent them from being able to pay. Older adults who have set up automatic payments may not realize if their account runs out of funds, leading to an unintended lapse.
There are also situations where the policyholder may become ill or incapacitated and unable to manage their financial affairs. Without a designated person to oversee their bills, payments might not be made, and the policy could lapse. Sometimes policyholders may believe they have sufficient cash value built up in their policy to cover premiums, only to later discover this is not the case.
Regardless of the reasons, a life insurance lapse can leave beneficiaries without the benefits they were counting on. However, there may be steps that beneficiaries can take to restore coverage or recover benefits.
Legal Options for Beneficiaries After a Life Insurance Lapse
If a life insurance policy lapses, beneficiaries may still have legal options. It is important to carefully review the policy and understand the specific terms that were in place. In New Jersey, beneficiaries can explore several avenues to potentially recover life insurance benefits, even after a policy has lapsed.
First, beneficiaries should check whether the policyholder was entitled to a grace period that was not properly communicated. Life insurance companies are required to notify the policyholder if their coverage is about to lapse, and they must provide a grace period during which payments can be made without losing coverage. If the insurance company failed to provide proper notice or did not adhere to the policy’s terms, beneficiaries may be able to challenge the lapse.
Another legal option may involve proving that the lapse was unintentional due to the policyholder’s incapacity or lack of understanding. In some cases, if the policyholder was suffering from a medical condition or cognitive impairment that prevented them from making payments, it may be possible to argue that the lapse should be reversed. Courts in New Jersey have recognized that policyholders with diminished mental capacity may not fully understand the consequences of missing payments, and this could be a valid argument in court.
Additionally, if there is evidence that the life insurance company acted in bad faith by failing to uphold their duties under the policy, beneficiaries could pursue legal action. This could include situations where the company failed to properly communicate the risk of lapse, delayed the delivery of notices, or engaged in other unfair practices that contributed to the policy lapsing.
We contacted Trief & Olk to help us with a life insurance issue and Shelly Friedland was the attorney assigned to our case. Before Shelly took our case she explained to us that the likelihood of our success without going to court was possible but not likely. Unfortunately we did not get the outcome we had hoped for but it was our decision to not move forward and have our case litigated. Shelly is very knowledgeable and was very straight-forward in her assessment of our case as we moved forward. She was very patient and thorough in answering our questions. She always responded in a timely manner and listened to our concerns. We would certainly recommend Shelly and would use her firm again in the future.” - John Ramig If there is any possibility of winning your life insurance case – this is the place to do it for you. They are efficient, honest and will achieve the best possible outcome. Shelly Friedland worked on my case where a life insurance policy had lapsed and was even a few days beyond the grace period. Farmers had rejected my claim twice and was unwilling to take a second look. Shelly was able to get them to pay the entire claim without going to court, and the full amount was deposited in my account within a couple months. Highest recommendation.” - Kathleen Brown Trief & Olk is a superior law firm. Their attorneys and other legal professionals have a brilliant understanding of the law and the litigation process. They diligently perform their work in an efficient, strategic and cost-effective manner to ensure the best possible outcomes for their clients. - Christopher Hughes
Reinstating a Lapsed Life Insurance Policy
Many life insurance policies allow for reinstatement after a lapse, though this process can be complex. Reinstating a policy typically involves paying all missed premiums and possibly providing proof of the insured’s continued good health. If the insured passed away after the policy lapsed but within a certain period, there may still be an opportunity to reinstate the policy and recover benefits.
In some cases, the insurance company may offer a limited window in which reinstatement is possible. Beneficiaries should carefully review the policy and consult with legal professionals to understand whether reinstatement is an option. It is important to act quickly, as time limits for reinstatement can vary, and the longer a policy has been lapsed, the harder it may be to reinstate it.
If reinstatement is not an option, beneficiaries may still be able to recover some benefits through a legal claim. Depending on the circumstances, there may be grounds to argue that the insurance company wrongfully terminated the policy or that the lapse should not have occurred under state law.
Settlements & Verdicts
Filing a Claim Against the Insurance Company
If beneficiaries believe that the life insurance policy lapsed due to the negligence or misconduct of the insurance company, they may have grounds to file a lawsuit. In New Jersey, life insurance companies are required to follow strict regulations regarding how they manage policies and communicate with policyholders. If the company violated these regulations, beneficiaries may be able to recover benefits through a legal claim.
For example, if the insurance company failed to provide proper notice of the policy’s impending lapse, this could be grounds for a lawsuit. Similarly, if the company engaged in deceptive practices or failed to follow the terms of the policy, beneficiaries may have a case. Filing a claim against an insurance company requires gathering evidence and working with a legal team that understands the complexities of life insurance law in New Jersey.
Beneficiaries should not hesitate to explore their legal options if they believe that the insurance company has acted unfairly. A life insurance payout can make a significant difference in providing for a family’s financial future, and beneficiaries have the right to fight for the benefits they were promised.
Navigating the legal landscape after a life insurance lapse can be confusing and overwhelming, especially for grieving families. At Trief & Olk, we understand how important life insurance benefits are to the financial well-being of beneficiaries. Our experienced team is dedicated to helping families in New Jersey understand their rights and take action to recover the benefits they deserve.
If you are a beneficiary facing a life insurance lapse, Trief & Olk can help you explore your legal options. Whether it’s reinstating a lapsed policy, challenging the insurance company’s actions, or filing a legal claim, our firm is here to guide you through every step of the process. We offer personalized legal services tailored to your specific needs, ensuring that your case is handled with care and attention.
At Trief & Olk, we are committed to fighting for the rights of beneficiaries and helping families secure the financial support they were promised. Contact us today for a free consultation to discuss your case and learn how we can help you recover life insurance benefits. Our firm works on a contingency fee basis, meaning you will not owe any legal fees unless we achieve a successful result for you.