Payment of Premium Provisions

Question 1

Mode of Premium

Answer 1

This provision addresses the frequency of premium payments (monthly, quarterly, semiannually or annually), and to whom the premiums are payable. The more frequent the payment, the greater the cost will be.

Question 2

Grace Period

Answer 2

The grace period is the time period provided after the premium due date before a policy lapses. If the insured dies during this period, the death benefit is payable minus any premiums or loans due. The typical grace period is a month (30 or 31 days) unless state law specifies otherwise.

Question 3

Automatic Premium Loans (APL)

Answer 3

This provision must be elected by the policyowner and can be cancelled at any time. It enables the insured to automatically borrow against the cash value to cover a premium payment and prevent the contract from lapsing unintentionally

Question 4

Reinstatement

Answer 4

If a policy has lapsed unintentionally due to nonpayment, it can be reinstated by the owner. The reinstatement time period is typically 3 years from lapse, but can be as long as 5 years. In order to reinstate, the insured must provide evidence of insurability and the owner must pay all late premiums from the date of lapse, plus interest. Reinstatements are designed to put a policy back in force as if the lapse never occurred. Upon reinstatement, a new incontestability period takes effect.