Whole life insurance is a permanent form of coverage that guarantees cash value accumulation at specific points in the contract, a pre-defined maturity date, and a fixed death benefit amount (face value).
These features combine to create a variety of possible outcomes when the owner stops paying the premiums while alive or because he or she passes away.
At the outset, the policy could continue indefinitely, convert to term, shrink to a smaller face amount, or lapse (cancel or expire).
However, after the death of the insured, unpaid premiums can affect how long beneficiaries have to file a claim and make it harder to find relevant paperwork.
Do Whole Life Insurance Policies Expire?
The expiration of the policy does not always happen right away or whenever you stop paying whole life insurance premiums. First, no further money is due after you reach the maturity date when the contract endows (cash value equals the face value). The industry calls it permanent coverage for a reason.
However, non-payment before the maturity date means that almost anything can happen, including extension, conversion, reduction, or cancellation.
Cash Surrender Value
The cash surrender value built up inside the contract enables several nonforfeiture clauses that come into play if you need to stop paying whole life insurance premiums. You can allow the policy to lapse (take the money and run), or convert into something more comfortable to afford.
The conversion alternatives are attractive because you do not have to show evidence of good health. Your beneficiaries may still need the coverage in the future (see below for possible consequences).
- The Reduced Paid-Up Life Insurance Option is a second nonforfeiture clause that permits the owner to use the net cash surrender value of the contract as a single net premium to purchase a smaller amount of fully paid-up permanent coverage.
- The Extended Term Insurance Option is a nonforfeiture feature that allows the owner to use the net cash surrender value accumulated in the contract as a single net premium to purchase term life insurance.
Stopping premium payments will not automatically cancel your whole life insurance policy. In fact, several standard features and optional riders could allow the coverage to continue for some time until you send a written letter of termination.
- The Grace Period is a 31-day time interval during which the coverage remains in force even when the owner does not pay the premiums.
- The Automatic Premium Loan provision borrows money from the accumulated cash value (if any) to cover any overdue fees at the end of the grace period. The cash value must be significant enough to cover the cost plus interest due by the end of the policy year.
- The Waiver of Premium Rider excuses all money due (after a 6-month waiting period) on the contract during the time that the insured is totally disabled and under the regular care of a doctor.
How Long Do You Have to File a Claim?
Beneficiary rights expire after the full payment and acceptance of the death benefit for an in-force (non-lapsed) policy. Conceivably, you could have a very long time to file a whole life insurance claim after a loved one passes away.
Insurance companies will honor claims for in-force policies at the time of death, even if the owner stopped making premium payments after his or her demise (which is common).
However, you may be out of luck if the owner chose to surrender the policy, or opted for the extended term conversion while still breathing. People can easily outlive term coverage.
Companies Contact Beneficiaries
While you could have a very long time to file a claim, do not rely on the whole life insurance company to contact beneficiaries and shorten the process. The insurers have no proactive legal duty to determine if an insured person of an active policy has died under unclaimed property law1.
However, non-payment does force the companies to perform a search by social security number to determine if the person died before exercising the nonforfeiture options. If so, they must contact the beneficiaries to notify them about the available benefits. Also, once somebody does file a claim, the company must attempt to contact the remaining recipients.
Unfortunately, many owners neglect to keep the insurance company informed of changes in beneficiary name, address, email, phone number, and other contact information. Inaccurate contact information makes communicating with these people very hard and unreliable.
Unclaimed life insurance databases can help you track down any whole life contracts that might have named you as a beneficiary. Even if you waited years after a loved one passed away, it could prove worthwhile to invest time searching online. You could find a pile of lost money – provided the coverage did not lapse before death due to non-payment.
- The MIB Policy Locator service allows executors or administrators of a decedent’s estate to search its database of life insurance applications. If MIB finds a match, it will return the insurance company name, application date, and any relevant contact information2.
- The NAIC Policy Locator is a free service that permits individuals who believe they are beneficiaries, executors, or legal representatives of a deceased person to submit a request. NAIC will then contact participating insurance companies and request that they search their databases by name, address, and social security number of the deceased1.
- com is an online resource connecting to state-run databases of unclaimed bank accounts, safe deposit box contents, uncashed checks, insurance policies, CDs, trust funds, utility deposits, stocks and bonds, wages, and escrow accounts3.
The insurers do have a legal duty in many cases to communicate information to the states about contracts that mature without a claim. The maturity (or endowment) date is typically age 65, 95, or 100.
Are You a Beneficiary
Do not wait too long to find out if you are a beneficiary of a whole life insurance policy after the death of a close family member – especially a parent who stops making premium payments. Remember, the nonforfeiture clauses may give you a cushion of time to file the claim, but the contract can expire at some point if it did not reach maturity.
Looking through files to file the relevant paperwork is the ideal way to discover if you are a beneficiary. If you cannot find the records, keep an eye on the deceased’s mailbox and email if you have access. Permanent coverage means ongoing communication from the insurance company with a status update on cash values, along with invoices (before the policy endows).