Prompt payment of the premium is crucial to the continuation of coverage provided by any insurance policy. A lapsed policy is one that has been terminated because of nonpayment of premiums. More than one-half of all whole life policies lapse within ten years of being issued. If your life insurance policy lapses, you must prove insurability and pay any missed premiums, plus interest, to be reinstated. Alternatively, you might pay a higher premium for a new policy, reflecting your current age.
To help prevent a lapse, state laws generally require that cash-value and multiyear term policies include a grace period, that is, a period of time (usually 30 days following each premium due date) during which an overdue premium may be paid without a lapse of the policy.
During the grace period, all provisions of the policy remain intact, but only if payment is made before the grace period ends. Assume, for example, that payment was due but not paid on January 1. If the insured were to die on January 15, the policy could be reinstated as long as payment was made by January 30, given a 30-day grace period. It also may be possible to “buy back” a lapsed cash-value policy by paying any missed premiums and the cash value that would have accumulated while the policy was lapsed. [/responsivevoice]