What Happens If I Stop Paying My Life Insurance Premium?

The short answerThere's a grace period to catch up. In California, life insurance policies must allow at least 60 days after the premium due date, and coverage stays in force during it. If you don't, a term policy typically lapses and the coverage ends. A permanent policy with cash value may use that value to keep going for a while, or offer other options. Call your agent before you stop paying; there are often better choices than letting it lapse.

Term life

Term policies have no cash value to fall back on. After the grace period, the policy generally lapses and there's no money back. Many policies allow reinstatement within a set window, usually with back premiums and sometimes new health questions.

Whole life and IUL

If the policy has built up cash value, a few things can happen depending on the contract:

An automatic premium loan may pay the premium from cash value.
You may be able to reduce the death benefit to lower the premium.
You may be able to surrender for the cash value, minus any surrender charges and loans.
On an IUL, policy charges keep coming out of the cash value every month. If it runs too low, the policy can lapse.

Before you stop paying

Money gets tight. Before cancelling, ask about lowering coverage, changing the payment date, or switching to a smaller policy. Losing coverage, then trying to buy it again later when you're older, almost always costs more. A quick look at your budget may also free up the payment. In California, you can also name a backup person, like a family member, to be notified before your policy lapses. It is worth doing.

Find the money for protection

The free FAST calculator shows where money slips away each month and how much could go toward coverage instead. You don't need a lot of money to protect your tomorrow, today.

Try the FAST calculator

Related free tools

Family needs analysisAdd up debt, income, mortgage and education to get your own coverage number.See what you may qualify forAnswer a few health questions and see which options are likely to fit.Mortgage coverage calculatorStart with your loan balance and monthly payment.

Common follow-up questions

Do I get my money back if my term policy lapses?

Generally no. Term insurance pays a death benefit while it's active; it doesn't build cash value.

Can I reinstate a lapsed policy?

Often, within a window set by the policy, usually by paying missed premiums and sometimes answering health questions again.

Is there a grace period?

Yes. In California it is at least 60 days from the premium due date, and your coverage stays in force during it. Other states often allow about 30 days.

Should I cash out my whole life policy?

Maybe, maybe not. Surrender charges, taxes and losing the coverage all matter. Talk it through first.

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