9-things-to-do-if-you-cant-pay-life-insurance-premiums

9 Things To Do if You Can’t Pay Life Insurance Premiums

If you can’t pay life insurance premiums, options like grace periods, revival, or plan changes can help keep your policy active and protect coverage.

Written by : Knowledge Centre Team

2025-07-02

2442 Views

14 minutes read

Exit Pop Up

Live Life More Confidently

Get best insurance from our experts

Name is required Name should be Valid
Mobile Number is required Mobile Number should be Valid
DOB is required DOB should be Valid
Annual Income is required
Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

From all the articles you have read on life insurance, you must now know what a life insurance premium is, righ? Premiums are paid by the policyholder every year till the policy matures. However, there are times when you just cannot make the payment. What happens in this situation? While it depends on the policy you have taken, most term life insurance plans lapse when you don't pay the premium by the specified due date. Thankfully, the situation is not all bleak when it comes to non-payment of premiums.

Key Takeaways

  • Life insurance policies often include a grace period of up to 30 days for late premium payments.

  • A waiver of premium rider can help you maintain the policy's active status during periods of disability or unemployment.

  • Dividends from whole life policies may offset premium payments if your insurer performs well.

  • Cash value can be used or borrowed against to pay premiums when funds are tight.

  • You can convert your plan to a paid-up status using the accumulated cash value and retain partial coverage.

What to Do if You Cannot Pay Premiums?

As mentioned before, non-payment of your term life insurance premium results in a lapse. However, there are options available with whole life insurance policies and permanent life insurance policies to maintain coverage.

1. Payment grace period

According to the IRDAI (Insurance Regulatory and Development Authority of India), all life insurance policies must incorporate a grace period of 30 days from the due date of payment.  For policies with monthly premiums, it is 15 days. On the other hand, for policies with quarterly premiums, the grace period is 30 days. During this period, the policy will be in lapse-pending status. You should premiums are not paid in a timely manne.

2. Use Waiver of Premium Riders:

You may skip a premium payment but continue to avail of the insurance benefits if you have a waiver of premium rider. The waiver may kick in if a disability exempts you from working and earning, making it difficult for you to pay premiums.

The waiver of premium rider will work as long as your disability to work is covered by your carrier's rules. Some riders even waive their premiums due to unemployment. This option may not be helpful in sudden financial emergencies, as the waiver rider does not take effect until after a waiting period, during which you must continue making payments

3. Use dividends to pay the premium:

Dividends are received throughtout the whole life insurance policy. When the insurance companies are performing well, mutual companies pay dividends to the policyholders that can be used to increase the cash value. Dividends can also be used to offset premiums. For this, you need to check with the insurance company to determine how many dividends apply to your premiums. However, the benefits may not be immediate.

4. Use the cash value to pay the premium:

Permanent life insurance accumulates a significant amount of cash value over the years, which can be used to pay for premiums. You can also borrow against this amount and use the money to pay for the premium or any other expense you may have. However, there will be interest charged on the amount borrowed against the cash value.

When the loan is not repaid, the death benefits will decrease, and the beneficiaries will receive a lower amount. The cash value can be withdrawn directly. However, you will need to pay taxes if the amount withdrawn is larger than the cash value portion of the life insurance policy. The withdrawal of cash value also reduces the death benefits.

Learn: how to make death and maturity claims on a life insurance policy.

5. Use the paid-up option:

Yet another option is using the cash value to convert the policy to paid-up status. It helps the policyholder maintain a certain amount of coverage without incurring additional premiums. However, this method is also likely to reduce the death benefits received by the beneficiaries. The longer the term of the policy is, the higher the cash value will be.

6. Policy face value:

You can also directly reduce the premium payment if the policy's face value is decreased. It may affect the overall cash value and the death benefit proceeds, but it is a preferable option to policy termination. Some insurance companies allow the policyholder to go back to the original benefit amount, while others do not.

You should contact the insurance company to determine the procedure for reverting to the original amount. It would be better if you obtained the consent of the beneficiaries, as they are the ones who will be directly affected by this.

7. Switching to level benefit:

With most policies, you have the option to increase the death benefits by paying higher premiums over time. However, you can also reduce the premium amount by switching from an increasing benefit to a level benefit. Reducing the level benefit may affect the ultimate death benefits received by the beneficiary, but it alleviates the problem of paying a higher premium some extent.

8. Switching to term life insurance:

the term life insurance premium is cheaper than the permanent policy. You can discontinue the permanent policy and withdraw the cash value to use it to purchase a term policy, such as the Canara HSBC Life Insurance iSelect Smart360 Term Plan. However, in the case of a term policy, the death benefits are only paid out if the policyholder dies during the policy period. You must continue to pay the premiums of the term plan on time, or the plan will lapse.

9. Cancelling the policy:

It might occur that you no longer need life insurance after all they children's expenses you have planned for have been paid off. In this case, you might consider dropping off the policy by surrendering it and getting the taxable surrender value. Cancelling a term life policy is simple, but cancelling a permanent life insurance policy is a bit more complex and time-consuming.

If you miss a premium payment, your term life insurance policy will lapse. However, you have some options with whole life insurance and permanent life insurance where you can either entirely drop the policy or utilize additional possibilities to maintain the coverage amount. It is advisable to contact the insurance agent or financial advisor before finalising any decision, as a wrong decision may put the future of your family and children at stake.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

Recent Blogs

Life Insurance Policy Lapse: Impact, Risks and What You Can Do?
16 Jan '26
3002 Views
10 minute read
Know what a life insurance policy lapse means, why it happens, how it affects coverage and benefits, and the options available to restore protection.
Read More
Life Insurance
Best Investment Options with High Returns in 2026
10 Jan '26
9682 Views
16 minute read
Best Investment Options in India. Looking for investments to meet your long-term financial goals? Here are the best investment plans for the year 2026 in India.
Read More
Life Insurance
Have Multiple Life Insurance Policies? Things You Should Know
09 Jan '26
1290 Views
7 minute read
Is it legal to own multiple life insurance policies? Would it cause any problem in claim settlement? Discover your answers here.
Read More
Life Insurance
What is Survival Benefit in Life Insurance?
06 Jan '26
3234 Views
7 minute read
Learn about survival benefits in life insurance, how they work, and their key features. Understand eligibility and payouts with Canara HSBC Life Insurance.
Read More
Life Insurance
Types of Life Insurance: Which One is Best for You?
05 Jan '26
3117 Views
9 minute read
Learn about different types of life insurance policies with Canara HSBC Life Insurance. Discover the best plans in India in 2026 and know how to buy them online.
Read More
Life Insurance
Principle of Indemnity: Meaning, Concept, Example
05 Jan '26
4536 Views
11 minute read
Understand the Principle of Indemnity in insurance. Its meaning, concept, and real-life examples. Learn how it protects policyholders from financial loss.
Read More
Life Insurance
What Is a Joint Life Insurance Policy and How Does It Work?
31 Dec '25
1180 Views
10 minute read
A joint life policy is a single plan that covers both the wife and the husband whether both of them are earning or only one. Understand how it works, who it suits best, key benefits, payout structure, and important points to consider before choosing one.
Read More
Life Insurance
What Is Insurable Interest in Life Insurance?
31 Dec '25
2466 Views
11 minute read
Explains the meaning of insurable interest in life insurance, why it is required, who can have it, and how it affects policy validity and claims.
Read More
Life Insurance
9 Financial Resolutions to Become Money-Smart This Year
31 Dec '25
1282 Views
11 minute read
Buy the best life insurance plan and become financially fit. Learn 9 more different financial resolutions to make your year worthwhile.
Read More
Life Insurance

Life Insurance - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.

Family Shield: Enhanced Protection

iSelect Smart360 Term Plan
  • 3 Plan options
  • Life cover till 99 years
  • Steady income benefit
  • Block your premium at inception

Start Young, Pay Less, Stay Secured

Young Term Plan
  • Life cover till 99 years
  • Coverage for spouse
  • Block your premium rate
  • Covers 40 critical illness

Fixed Returns, Zero Risks & Worries

iSelect Guaranteed Future Plus
  • 4 Plan options
  • Life cover + Guaranteed benefits
  • Accidental death benefit
  • Premium protection cover