What occurs when a life insurance policy's premium is not paid?

When a life insurance policy's premium is not paid, one potential outcome is that the cash value of the policy can be used to cover the premium and keep the policy in force. This feature is particularly relevant in permanent life insurance policies, which accumulate cash value over time.

If the policyholder has been paying premiums and has built up a cash value, they can often use that value to pay the premium due, preventing the policy from lapsing. This option provides flexibility and a safety net for policyholders who may face temporary financial difficulties, allowing them to maintain their coverage without needing to make an immediate cash payment.

In contrast, policies typically do not automatically reinstate themselves without action from the policyholder, and they do not lapse immediately; there is usually a grace period during which the premium can still be paid. Additionally, while some insurers may notify policyholders about missed payments, notification isn’t always guaranteed or conducted by phone. Thus, relying on the cash value to cover unpaid premiums is a valid and common practice for managing life insurance policies.