Lapse Due to Missed Premium Payments – New Jersey

Life insurance claims can be denied if the policyholder fails to make premium payments on time, resulting in what are known as “lapse” cases. Our firm has successfully represented policyholders and beneficiaries in New Jersey life insurance lapsed premium cases.

What is a grace period?

In New Jersey, life insurance policies cannot be immediately canceled for late payments. There is a grace period of 30 days for fixed premium policies (such as term life) and 60 days for cash value policies (such as universal life). This requirement is outlined in New Jersey Administrative Code § 11:4-41.3, and such grace periods are generally included in policy documents. Insurance companies are also obligated to notify policyholders adequately so that they have enough time to send in their payments.

When must the premium payment be sent?

In New Jersey, the insurance company does not need to receive the payment before the grace period ends, but the policyholder must ensure it is mailed within that timeframe.

Can beneficiaries still receive benefits if the policy has lapsed?

Yes, beneficiaries may still be entitled to the death benefit even if the policyholder missed a payment. There are various scenarios where a skilled New Jersey life insurance attorney can contest the lapse of a policy.

• Mailing issues: Occasionally, insurers fail to send the premium notice to the policyholder. If this happens, the missed payment could be the insurance company’s fault. It must prove that it mailed the notice on time and to the correct address, using actual proof of mailing or a thorough account of their mailing procedures.

• Insufficient notice timing: If the premium notice is sent too close to the due date, the policyholder might not have a fair chance to pay. In such cases, a lack of timely notification could invalidate the notice and keep the policy active.

• Unclear notifications: Premium notices must clearly state the due date, the amount owed, and where to send the payment. If they lack clarity, courts may treat them as a nullity and allow the policy to stay in force.

• Payment history considerations: Many individuals occasionally pay bills late, and insurance companies might overlook repeated late payments if they perceive the insured as a low mortality risk. However, when an unexpected death occurs, insurers may suddenly strictly enforce payment deadlines. An experienced New Jersey life insurance lapse attorney can invoke legal principles like waiver and estoppel to argue that the due date should be more lenient based on previous late payments.

The Consequences of Policy Lapses

Insurance companies often act quickly to cancel policies for missed payments, a practice that can benefit their bottom line while leaving consumers at a loss. A lapsed policy can mean significant financial waste for policyholders and the loss of crucial death benefits for loved ones. Additionally, if the insured is older or in poor health, securing a new policy may become impossible.

Insurers’ stances in lapse cases can be excessively strict. For example, we have successfully contested cases where payments were just one day late, highlighting that the premium notices were unclear or inconsistent.

In contrast to other financial obligations, such as mortgages or auto loans, where penalties for late payments are less severe, life insurance companies frequently cancel policies for minor delays.

If you’re facing a situation where the life insurance company has terminated the policy for non-payment of premium, you can contact New Jersey life insurance attorney Eric Dinnocenzo at (212) 933-1675 for a free consultation regarding your situation.