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When you have too little life insurance coverage, that’s called a life insurance coverage gap. If you die during a coverage gap, your dependents won’t have the financial support needed to completely replace your income. To provide a proper safety net for your loved ones, you need a life insurance policy that covers all of your financial obligations.
To learn more about how you can avoid life insurance coverage gaps, continue reading.
What Is Life Insurance?
Life insurance is a form of insurance coverage that protects your loved ones from financial distress if you happen to die unexpectedly. There are two types of life insurance, term life insurance and permanent life insurance. Term life plans last for a set period of time, offering coverage throughout. Permanent life plans instead offer coverage for the span of one’s entire life. To keep your insurance policy active, you must pay your premiums on time. If you don’t your policy may lapse, causing a coverage gap.
Types of Coverage Gaps
There are three common types of coverage gaps that frequently occur to people in the U.S. They are:
Policy expiration
If you have a term life insurance policy that doesn’t last as long as you need it to, you may face a coverage gap if you don’t replace the coverage when it expires. For example, if you buy a 10-year life insurance policy but have a 20-year mortgage, your family won’t have the cushion they need to finish paying it off if you die after that 10-year period.
To prevent this type of coverage gap, get new coverage six months before your current policy expires. Don’t just let your policy expire without having another coverage option in place. Whether you just shop for a new plan or convert your term life plan to a permanent plan, it’s important to be active in avoiding this coverage gap.
Policy lapse
If you don’t pay your premiums on time, your policy may be canceled. Usually, there is a 30-day grace period for late payments, but if you don’t pay during that period, you will lose coverage. This can lead to adverse circumstances if you happen to die before finding another policy to cover you.
To avoid this coverage gap, pay your premiums on time. You can also ask your insurer if they offer payment plans or extended grace periods for extenuating circumstances. It’s also important to remember that people who can’t afford their policy have the option to lower their death benefits, thereby lowering premiums. This can cut costs allowing you to pay your premiums on time.
Policy approval delays
The application process for life insurance can take up to six weeks and sometimes longer if your insurer needs additional information before they make an offer. This can create a coverage gap that may cause problems for your family if you die. Even if you have a policy offer, your family won’t get a death benefit if you happen to die before signing your policy papers and paying your initial premium.
To prevent this coverage gap from happening, ask if your provider offers temporary life insurance coverage. These are limited policies that can be used to get a death benefit if you die before the policy is finalized.
Avoid Coverage Gaps
Don’t let a coverage gap cause distress in your family if you die. Get covered now by calling Insured For Life. We can help you get started with a free quote on life insurance plans in your area. To reach us, call 1-888-989-0079.
