To keep your life insurance policy active, you’ll need to make timely premium payments. Most insurers will give you a few payment structures and methods to choose from. To avoid losing your coverage, choose the payment schedule and method that works for you.
How often can I make life insurance payments?
Most policyholders opt for monthly premium payments. Typically, you can choose from one of the following payment schedules:
- Annually — once a year
- Semi-annually — twice a year
- Quarterly — four times a year
- Monthly — twelve times a year
If you stop paying your premiums, your policy will lapse and your insurer will terminate your coverage.
Can I get a discount for paying up front annually?
It’s rare, but a handful of insurers offer a discount between 1% and 8% if you pay your premium annually. These include:
- John Hancock
- Legal & General
- Liberty Mutual
- Mutual of Omaha
- Protective Life
How long do I have to pay premiums?
If you have a term life policy, you’ll need to pay premiums for the length of the term, which could be 1, 5, 10, 15, 20, 25 or 30 years. Your policy expires at the end of your term.
If you have a permanent policy, like whole life insurance, you’ll have to pay premiums for your entire life to avoid losing your coverage. However, once you’ve built up enough cash value, you can typically use it to cover your premiums.
Will my payments stay the same?
With most life insurance policies, the premium stays the same for the life of the policy.
The exceptions are universal and variable universal life policies. These offer flexible premiums, so you can adjust the amount and frequency of your payments to suit your situation.
How do I pay my life insurance premium?
The options vary between insurers, but usually, you’ll be able to pay by personal check or electronic funds transfer (EFT). No insurer will accept cash.
Can I pay for life insurance with a credit card?
Most insurers will allow you to pay your initial premium payment with a credit card. After that, we could only find one insurer that will accept credit card payments: Transamerica. The same goes for debit cards: Your carrier will probably let you use it for the first payment, but you’ll need to go with a check or EFT for recurring payments.
From an insurers’ perspective, the high fees and state regulations around credit cards can make this payment method too complicated. As a policyholder, using a credit card can put you at risk for a policy lapse. Credit cards expire and need to be replaced, and a premium payment could cause you to go over your credit limit or lead to a fraud alert, rendering your card unusable.
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What is limited pay life insurance?
Some whole life insurance policies come with a limited pay option, which allows you to pay off your premium entirely in 10, 15, 20 or 30 years.
If you choose one of these payment structures, your premium will be higher, but you won’t need to pay premiums for your entire life. And, you’ll still have lifelong coverage, even once your policy is “paid up.”
What happens if I can’t pay my premium?
Every insurer is legally required to give you a grace period to make up a missed premium payment without penalty. Grace periods usually last 28 to 31 days — and your policy stays in force during this time.
If you still can’t pay your premiums, these are your options:
- Use a waiver-of-premium rider. Are you unable to pay due to an unforeseen injury, illness or disability? If you added a waiver of premium rider to your policy, it can kick in to cover your premiums for a specified period of time while you’re not working.
- Tap into your policy’s cash value. If you have a permanent policy, you might be able to use any accumulated cash value to pay your premiums. Just know that this will reduce your policy’s death benefit, which means your beneficiaries won’t receive as much money if you die.
- Use your dividends. Some permanent policies pay dividends based on the insurer’s profits, and you can use these to offset your premiums.
- Cash out the policy. No longer want or need coverage? You may be able to surrender your permanent policy and collect the cash.
- Cancel the policy. You can cancel your policy at any time by contacting your insurer. If you simply let your policy lapse and decide you still want life insurance, most insurers will reinstate coverage within 30 days of a lapse without the need for any additional paperwork.
To maintain your coverage, you’ll need to pay your premiums on time — and most insurers give you a few payment structures and methods to choose from. While the grace period offers some flexibility with late payments, failing to pay your premium can result in a loss of coverage and make it harder to get a policy in the future.
Find a policy you can comfortably afford by comparing life insurance companies.