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Lapsed Life Assurance Policy: Can a Beneficiary do something about it?

While the policy is in force, it is the policy owner who makes the decisions about the policy. That is, unless the beneficiaries are designated as irrevocable beneficiaries, in which case any changes made in the policy should be with their signature.

However, if the policy owner decides to stop making payments and allow the policy to lapse, chances are, the beneficiaries will not even know about this – until they make a claim when the Insured dies. This is true for cases when the policy owner (which is also the Insured) is in a diminished mental capacity and cannot make sound decisions about the policy.

A beneficiary can do only three things for a lapsed life assurance policy:

Make the Premium Payments Themselves

First, you should call your attorney to have him execute a power of attorney. This gives you the legal basis by which you can take over the Insured’s financial affairs.

The insurance company will usually not provide information about the policy to beneficiaries, only to people authorized to get the information, such as the policy owner. Thus, you need the power of attorney to give you the right to take over the premium payments as well as to make arrangements with the insurance company.

Then, you can start asking the insurance company if reinstatement is possible and then start making the insurance payments yourself.

Check for Cash Value

A life assurance policy will have cash value and this cash value may keep the policy in force for a while. What will happen is that when premium payments stop, the policy will turn to its cash value to fund the premium payments until such time that the cash value itself is deleted. When that happens, the policy will lapse and you can no longer make any death claims on the policy.

Check for Riders on Waiver of Premium

A Waiver of Premium rider is a rider that waives the policy’s premiums if it can be shown that the policy owner can’t pay the premiums due to disability or illness. It is an optional rider that the Insured can buy at the time of policy application. With the waiver of premium rider, the policy will remain in force until such time that you need to make a claim.

However, there are limits as to what age you can make use of the waiver of premium benefit. In some policies, this will only be applied if the Insured is 60 years or below. This depends on the terms as stipulated in the policy contract.

To protect your loved ones for less, fill the form on the right to get your life insurance quote.