Premium is the periodic payments to make to the insurance company in exchange for the insurance company providing you with life insurance. In the present economic scenario, it is common for people to default on the payment of their life insurance premiums. If you have failed to pay your life insurance premium, its not a good thing. Do you know the consequences of this?
First of all, no insurance company is out there doing charity work. Insurance is their business and their goal is to earn profits. Insurance companies use your premiums to pay your death benefits. If you live long, your death benefits will be less than the total premium paid by you. The difference is the profit earned by the insurance company for taking the risk of insuring you. If you do not pay your premiums, your policy will lapse and all premium paid till then will be forfeited. Insurance companies cannot continue to keep cover in place if you are not paying the premiums required. If they do, they may have to shut shop sooner or later. It is therefore never advisable to default on your life insurance premium payments. But sometimes you may fail to pay your life insurance premium despite your best intentions. If you miss paying your premium, your policy will not directly lapse. You will first receive a letter from the insurance company advising you that they have not received your payment and outlining the next actions if you continue to fail to pay your premiums as directed. If you have forgotten to pay the premium due to some oversight, you can pay the premium by following the directions in the letter and your policy will continue.
What if you cannot pay your premiums because of financial troubles? Well under normal circumstances missing 2 or 3 premiums will not cease the life cover provided however, you should contact the company to arrange to bring your plan up to date. The insurance company will allow you to repay any outstanding premiums should the problem be a financial one thereby bringing your plan up to date. Some companies let you decrease your premium by decreasing the death benefits of your life insurance policy. But if you miss more than 4 premium payments, you may be in big trouble. Your policy will most definitely lapse. If the death of the insured is the cause of lapse, then in most cases, the insurance company will pay the death benefits without any fuss to the beneficiary
