Insurance Company Can Use Policy Money To Pay Premium

Added August 31, 2005 by Think Glink Staff

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Summary: When you buy life insurance you have to pay monthly premiums to keep the policy active. If you worry about being able to make premiums you can add riders to your policy that will cover the insurance premiums if you become disabled. In addition some insurance policies will take the premiums out of the policy's cash value if you cannot make the payments.

Q. What if I become disabled and can't pay the premium, or what if I fail to make the required premium payment?

A. Provisions or "riders" that provide additional benefits can be added to a policy. One such rider us a "waiver of premium for disability." With this rider, if you become totally disabled for a specified period of time, you don't have to pay premiums for the duration of the disability.

If you miss a premium payment, you typically have a 30- or 31-day grace period during which you can pay the premium with no interest charged. After that, the company -- with your authorization -- can draw from a permanent policy's cash value to keep that policy in force. In some flexible-premium policies, premiums may be reduced or skipped as long as sufficient cash values remain in the policy. However, this will result in lower cash values and a shortened coverage period.

Return to Frequently Asked Questions about Life Insurance.

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