What happens when you have missed an installment on your life cover? Whether you pay through a debit order or you changed your account number and missed a payment here is what you need to know.
When you enter an agreement with your life insurer, they will inform you when they will debit your account. Premiums are paid in advance to cover the upcoming month. This means you will have to hold up the other end of the agreement by ensuring that there are enough funds to cover your premium.
However, should you miss an installment because of switching accounts or there being insufficient funds your cover will be suspended for the upcoming month?
Your insurer will notify you
Before your cover is suspended your insurer will notify you that a payment has been missed on your cover. However, not all insurers will send a notification that you have missed a payment.
Therefore, it is vital to make sure that you pay your premium. While you risk not being covered for the upcoming month, you will be given a grace period.
What is a grace period?
Missing a payment on something as important as life cover means that your claim will not be paid out should anything occur in the upcoming month that you are not covered for.
However, the Policyholder Protection Rules that were introduced in 2004 mean that insurers should give you a grace period when you have missed a payment.
The rule states that insurers should give policyholders a period of grace for the payment of premiums of no less than 15 days. What this means is that you have 15 days to make a payment on your premiums.
Therefore, if you are debited on the first day of the month you will have until the 16th of that month to make a payment. Your claim might still be covered during this grace period but fixing this as soon as possible can help you avoid any disappointment when it is time to claim.
When will your policy be cancelled?
Once the grace period has ended and you still have not made a payment, your insurer will cancel your policy. What this means is that you will no longer be covered by the policy. This can affect your application for another cover, which is why it is vital to carefully read your policy when it comes to the premium and cancellation section.