Termination and Reinstatement

How to stop life insurance

When you stop your life insurance as a policyholder, this is called “surrendering”. You can get immediate value when you surrender your life insurance policy depending on what kind it is.  If it is non-participating life insurance (like Sun Fit), you would get the Cash Value.

Non-payment, Reinstatement Period, and Lapsed policies

What happens when I cannot pay my life insurance policy?

If it is a non-participating policy or non-VUL, your policy will lapse. Then you will be given a grace period. Afterward, you have a period where you can pay for reinstatement. You basically repay your indebtedness by submitting an application for reinstatement and paying back the premiums with interest.

Grace Period

The grace period is designed to give the insured more time to pay the premium while coverage remains in force.

Grace period is usually 31 days and it is not required that cash will be paid for the premiums in the grace period.

If it is a participating policy, has cash value, or is a VUL, your premium charges will be charged against your fund value or cash value. If they are exhausted, you can still avail of reinstatement. 

But if the reinstatement period ends without payment, the policy is considered “lapsed”.

What if the insured dies during the grace period and the premium supposed to be paid was not paid? The insurance company will usually pay the beneficiary the face amount of the policy minus the unpaid premium.

Convertible Feature of Term Policies

When a term insurance policy reaches its termination period, it can be changed to permanent insurance without evidence of insurability. This feature is called convertibility.

To reinstate a policy after it has lapsed for non-payment, what are required?

  • Application for reinstatement
  • Payment of all overdue premiums plus interest
  • Evidence of insurability