What is a life insurance premium?

Premiums explained

Premiums are the payments for the life insurance policy, paid to the insurance company. Payments are made, usually monthly, throughout the life of the policy – stopping at the end of the term for term life insurance and not stopping until the death of the insured for whole life insurance policies.

For term life insurance policies, if the insured stops paying the premium, the coverage stops. In some cases, the insured may need to reapply or requalify health status to reinstate the coverage. For whole life insurance policies, there are a couple of different outcomes if the insured stops paying the premiums.

For some policies, the life insurance coverage ceases, but the insured can cash out the policy and collect the money. Taxes may be due on the cash value if it exceeds the dollar amount of the premiums paid to date. For other life insurance policies, with non-forfeiture options, life insurance coverage will continue, but the death benefit will be reduced.

For other life insurance policies, coverage will simply lapse. Some insurers allow consumers to reinstate a whole life insurance policy that has lapsed within five years, although proof of health status and insurability may be required, even if it wasn’t when the policy was originally purchased.