You usually keep some value. A whole life policy with cash value must let you take the cash or keep a smaller paid up policy.
First, there is a grace period. Texas and Washington say most policies give you 31 days after the due date to pay. If you die in that time, your family still gets paid, minus what you owe.
After that, the policy can lapse. But whole life builds cash value. Washington says you can use cash value to pay an overdue premium.
You still have choices. A model law written by state insurance regulators (NAIC) says you get 60 days after the missed due date to ask for cash or a paid up policy. If you pick nothing, the paid up option written in your policy starts on its own.
The cash can come with costs. Texas says early cash outs can have a surrender fee. If you take out more than you paid in, you may owe taxes.
Call the company before you stop. Ask for your choices in writing.
- Pay late inside the grace period
- Use your cash value to pay the bill
- Take the cash value and end the policy
- Keep a smaller policy that needs no more payments
- Bring the policy back later
More questions
What if I just miss one payment?
You likely have 31 days to pay with no lapse. Pay as soon as you can.
Do I pay tax on the cash?
Maybe. Texas says money you take out is usually not taxed until it is more than the premiums you paid.
Words to know
- Cash value
- The savings part of a permanent policy. It grows over time and can be used for loans, cash, or to pay premiums.
- Grace period
- Extra time after your premium is due to pay without losing coverage. Most policies give 31 days.
- Lapse
- When your policy ends because you did not pay the premium in time. Your beneficiaries will not get the death benefit.
- Premium
- The amount you pay an insurance company for your policy.
- Whole life
- Permanent insurance that lasts your whole life as long as you pay. Premiums, death benefit, and cash value are guaranteed.
