When a life insurance policy lapses, it can create significant challenges for the policyholder or beneficiaries who were relying on that coverage for financial stability. In New Jersey, the reasons behind a lapse can vary, but the impact is often the same: uncertainty and stress about what comes next. Understanding the steps to take after this occurs can help individuals regain their footing and explore options for restoring coverage or mitigating the consequences of the lapse. At, Trief & Olk, we are here to guide you through the legal process and help you navigate the complexities of your case.
Understanding Why Life Insurance Policies Lapse
A life insurance lapse happens when the premiums are not paid within the grace period provided by the insurance company. The grace period is usually around 30 days, though it may differ depending on the terms of the policy. Nonpayment can occur for a variety of reasons, such as financial hardships, oversight, or changes in banking details that prevent automatic payments. Whatever the reason, the result is the termination of the coverage, leaving the policyholder without the protection they initially sought when purchasing the policy.
In some cases, individuals may not realize their policy has lapsed until they attempt to use it, such as filing a claim after the death of the insured. When this happens, beneficiaries may be denied the payout they were counting on, leading to financial distress. Knowing the reasons behind the lapse is the first step toward determining how to address it effectively.
Review the Terms of Your Policy
The first step after discovering a lapse is to carefully review the terms of the life insurance policy. The original contract will contain important details about what happens when payments are missed and whether there is any opportunity to reinstate the policy. Many insurance companies allow for reinstatement within a specific timeframe, though this often requires paying the missed premiums along with any applicable fees or penalties.
The policy terms may also explain if the coverage automatically converts to a reduced benefit option or if all coverage is completely terminated. Understanding the status of the policy after the lapse will provide clarity about the next steps and whether pursuing reinstatement is possible or necessary.
Contact the Insurance Company Immediately
Reaching out to the insurance company as soon as possible after discovering a lapse is essential. The insurer can confirm the status of the policy and explain the options available for reinstatement or purchasing a new policy. Timely communication can make a significant difference in the outcome, as some policies have strict time limits for reinstatement.
When speaking with the insurance provider, ask about the specific requirements for reinstating the policy. This may include providing proof of insurability, such as updated health information, and making a payment to cover the outstanding balance. Keep a record of all communication with the insurer, including dates, names of representatives spoken to, and the information provided.
Explore Reinstatement Options
Reinstating a lapsed policy can often be the best option, especially if the coverage was significant or tailored to the policyholder’s unique needs. Reinstatement typically requires the policyholder to pay all missed premiums, along with any interest or fees. In addition, the insurance company may ask for evidence of insurability, which could involve a health questionnaire or a medical exam.
If the lapse occurred due to financial difficulties, it may be worth discussing flexible payment arrangements with the insurer. Some companies may offer solutions to help policyholders reinstate their coverage without incurring further financial strain. The sooner action is taken, the higher the likelihood of a successful reinstatement.
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
Consider Purchasing a New Policy
If reinstatement is not an option or proves too costly, exploring the possibility of purchasing a new life insurance policy may be necessary. While this route can present challenges, especially for older individuals or those with preexisting health conditions, it may still provide an opportunity to secure valuable coverage.
When seeking a new policy, compare options from multiple insurance providers to find one that meets your current needs and budget. Be transparent about any gaps in previous coverage and provide accurate information during the application process to avoid complications later. Consulting with a financial advisor can help identify policies that align with long-term goals and provide the necessary protection for loved ones.
Address the Impact on Beneficiaries
A life insurance lapse can have serious consequences for the intended beneficiaries, particularly if they were depending on the policy payout for financial support. It is important to communicate openly with beneficiaries about the situation and any steps being taken to resolve it. If the lapse is discovered after the policyholder’s death, the beneficiaries should contact the insurance company to verify the status of the claim and explore their options.
In some cases, the insurer may provide limited benefits based on the premiums that were paid prior to the lapse. Understanding the potential outcomes can help beneficiaries plan accordingly and seek alternative sources of support if necessary.
Settlements & Verdicts
Preventing Future Lapses
Once the immediate situation is addressed, it is important to take steps to prevent future lapses in life insurance coverage. Setting up automatic payments can help ensure premiums are paid on time, even if the policyholder is busy or distracted by other responsibilities. Regularly reviewing the policy terms and keeping personal contact information up to date with the insurance provider can also help avoid misunderstandings or missed communications.
For those facing ongoing financial difficulties, discussing premium payment options with the insurer may uncover solutions such as adjusting the coverage amount or switching to a more affordable policy. Maintaining open communication with the insurance company can go a long way toward keeping the coverage in place and avoiding lapses in the future.
Seek Legal Assistance for Complex Cases
In situations where the life insurance lapse involves disputes with the insurance company or issues related to the policy terms, seeking legal assistance may be necessary. A knowledgeable legal team can help interpret the policy contract, negotiate with the insurer, and advocate for the policyholder or beneficiaries. This is particularly important when significant benefits are at stake or when the insurer denies a claim based on the lapse.
Legal professionals can also provide guidance on navigating state-specific laws in New Jersey that may impact the resolution of life insurance disputes. Understanding the legal landscape can empower individuals to make informed decisions and protect their rights during the process.
When facing the challenges of a life insurance lapse, the process can feel overwhelming and uncertain. Trief & Olk understands the importance of resolving these matters quickly and effectively to protect your financial stability and peace of mind. Our team is dedicated to helping clients in New Jersey navigate the complexities of life insurance policies and disputes. Contact us today for the support and guidance you need during this critical time.
