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

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

Struggling to pay life insurance premiums? Explore practical options like grace period, revival, paid-up value, and policy loans to stay covered

Written by : Knowledge Centre Team

2026-01-08

2449 Views

14 minutes read

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From all the articles you have read on life insurance, you must now know what a life insurance premium is, right?

Premiums are paid by the policyholder every year till the policy matures or the premium-paying term ends. However, financial constraints can sometimes make it difficult to pay the premium on schedule. In such cases, what happens to your policy? While it depends on the policy you have taken, most life insurance plans lapse when you don't pay the premium by the specified due date (after the grace period). 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 (or 15 days for monthly premium modes, as per policy terms) 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 Happens If You Don’t Pay Life Insurance Premium?

If you're wondering what happens if you don't pay an insurance premium, your policy usually enters a grace period, during which you can still make the payment and continue your coverage.

However, non-payment of insurance premiums beyond the grace period may result in a policy lapse, meaning your life cover can lapse and your benefits may be affected. In some cases, especially with permanent life insurance, there may be options like revival, using the cash value, or converting the policy to a paid-up status, depending on the terms of your plan.

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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.

  • Leverage theGrace 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, the waiting period 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 force, and the claim will be payable subject to the deduction of the unpaid premium, as per the policy terms.
  • 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 apply as long as your inability to work is covered under your policy. This option may not help in sudden financial emergencies, as riders can have waiting periods and specific eligibility conditions. 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
  • Use Dividends to Pay the Premium: Dividends are received throughout the whole life insurance policy. When insurance companies are performing well, some insurers pay dividends to policyholders whichcan 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.
  • Use the Cash Value to Pay the Premium: Permanent life insurance accumulates significant cash value over time, which can be used to pay premiums. You can also borrow against this amount and use the funds 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, the payout may be taxable if Section 10(10D) conditions are not met or if the amount withdrawn is larger than the total premiums paid, depending on the policy’s tax treatment. The withdrawal of cash value also reduces the death benefits.
  • Use the Paid-up Option: Another option is to use the policy's 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 beneficiaries receive. The longer the policy term, the higher the cash value will be.
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Did You Know?

If your life insurance policy lapses, you may still be able to revive it up to 5 years (non-linked) or 3 years (ULIP), as per IRDAI norms


Source: Financial Express

Young Term Plan - 1.5 Crore
  • Reduce the 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 beneficiaries' consent, as they will be directly affected.
  • 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 to some extent.
  • Switching to Term Life Insurance: The term life insurance premium is cheaper than the premium for a permanent policy. You can discontinue the permanent policy and withdraw the cash value to purchase a term policy. However, in a term policy, death benefits are paid only 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.
  • Cancelling the Policy: It might occur that you no longer need life insurance after all the children's expenses you have planned for have been paid off. In this case, you might consider dropping the policy by surrendering it and getting the taxable surrender value if applicable. 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 options with whole life and permanent life insurance, where you can either entirely drop the policy or utilise additional features 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.

Conclusion

If you’re facing difficulty paying your life insurance premium, the most important thing is not to panic or ignore the policy. A missed payment doesn’t always mean you lose your cover immediately; many plans offer options such as a grace period, revival, paid-up benefits, or even using accumulated cash value to keep the policy running. The right choice depends on the type of policy you hold, your current financial situation, and how much protection your family still needs.

Before taking a final call, review your policy document carefully and speak to your insurer or advisor to understand the long-term impact on benefits. With a timely and informed decision, you can manage the premium burden without compromising the financial security that life insurance is meant to provide.

Glossary

  1. Grace Period: Extra time after the due date to pay premiums without policy lapse, as per policy terms
  2. Waiver of Premium Rider: A rider that may waive future premiums during disability, helping keep the policy active
  3. Surrender Value: The amount you may receive if you cancel a permanent life insurance policy before maturity
  4. Face Value (Sum Assured): The basic coverage amount paid as a death benefit, which can be reduced to lower premiums
  5. Cash Value: Savings built in permanent life insurance that can be used or borrowed against to pay premiums
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Uncertain About Insurance?

FAQs

Missing a term insurance premium doesn’t immediately cancel your policy. Insurers usually allow a grace period for payment, but if the premium is not paid within that time, the policy can lapse, resulting in a loss of life cover.

Common reasons for non-payment of premium, if any, include job loss, reduced income, medical emergencies, unexpected expenses, or poor financial planning.

In non-payment of premium insurance, your term policy may lapse after the grace period, and the insurer may not pay the death benefit if a claim occurs during the lapsed period.

Yes, non-payment of insurance premiums can lead to loss of coverage, difficulty in reviving the policy later, and the need to purchase a new plan at higher premiums.

Yes. If you’re wondering what happens if i dont pay the life insurance premium, the policy may lapse after the grace period, which can result in reduced or stopped coverage depending on the plan type.

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.

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