While I was asleep
If you don’t pay your credit card bill then it can have an impact on your credit score. If you don’t pay your electricity bill, then your lights could get turned off. If you don’t pay your telephone bill then your phone might get disconnected. If you don’t pay your life insurance premium… well let’s not go there.
The truth is that not paying your premium regularly and on time can have a disastrous effect on both yourself and your family. “Lapse” is one word you never want to hear from any of your life insurance providers.
As a family man, I have dependents in my wife and children. To secure the financial future of my family, I did the right thing – I bought term life insurance. I bought 3 policies at different stages of my life – when I got married, when I had my first child and the third after my second child was born. All the plans I bought has a 30 year term and I bought them from different life insurance providers. Why 3 different providers? It’s simple: I bought these plans at different stages of my life and at different premium rates, because every time I wanted to buy, a different life insurance provider came back with a cheaper option.
Having three policies from different providers meant I had to keep track of when to pay the premium– because all of them had different due dates. The last policy I took was a 1 crore term life insurance policy and I was considering dropping the smallest one of the three, the 10 lakh term policy. I told my wife that whenever the bill comes in for the 10 lakh term policy, to go ahead and let it expire.
What I missed doing was explaining to her which policy was which. Turns out she let the 1 crore term policy lapse instead of the 10 lakh. OMG! What made matters worse was that I didn’t notice this error till several months after the due date.
Luckily I was in good health. I knew if I did have to reapply for insurance, that I would get it easily. But, I also knew that it would take some time to go through the medical tests again. Hoping that there was a quick solution, I got on the phone and called the insurance provider immediately. I was thrilled when I learned that reinstating the policy was really simple.
While on the phone with the customer service representative I learned that most insurance companies provide a grace period if you miss your premium payment. The grace period is usually 30 days after the premium due date. Since it had been more than 30 days since my premium was due, I missed the graced period and my life insurance policy had officially lapsed.
How to get a lapsed policy reinstated
I had to request the Reinstatement of my policy by filling up a simple form which asked some basic medical questions to make sure that my health was still intact. It was now that I realized that Reinstatement could be a major issue for someone that already had pre-exisiting medical conditions – another reason to never let your policy lapse.
After filling out the form and making the premium payment, my policy was reinstated after the company reviewed my request.
Don’t make the same mistake I did
There are plenty of things that can go wrong in life, but letting your policy lapse should not be one of them. What if something happened to my health at that point of time? Yes, I did have two other policies in-force but it would have been plain foolish of me to let a fairly large life insurance policy lapse from which my wife and family would have benefited if something happened to me.