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Life Insurance Premium Default Notices in Illinois: Proper Notification is Essential for the Denial of Benefits

by Natalie T. Lorenz, Attorney at Law

The Illinois Insurance Code protects owners of life insurance policies when there has been a default in premium payments, but the insurance agency has not given proper notice of default to those owners. The Illinois Insurance Code provides, “No life company shall declare any policy forfeited or lapsed within six months after default in payment . . . unless a written or printed notice . . . shall have been duly addressed and mailed . . . to the person whose life is insured . . . .” Although this statute does not mention that notice is also required to be given to owners of life insurance policies, if they differ from the insureds, the Illinois courts have expanded the statute’s reach so that owners must be given notice as well.

In Bellmer v. Charter, the insured was an ex-husband, and the policy provided that the ex-wife was the owner. The parties divorced after applying for the policies, but the policies were never modified. The ex-husband failed to make a premium and was notified of default. However, the ex-wife was given no notice of the default. After the husband died, the insurance company denied the ex-wife’s claim due to the policy’s lapse from default in premium payments. However, the Bellmer court held that the insurance company was required to send notice of default to the last known address of the owner of the policy, and not just the insured.

MM&R recently encountered a similar situation in which an owner of an insurance policy received no notice that the insured had defaulted on premium payments. The insured had been in the hospital for some time and was unable to keep up with her mail, while the owner had no idea that any default had occurred. After the insured passed away, the insurance company told the owner of the policy that the policy had lapsed. However, after MM&R’s involvement, the insurance company reinstated the policy and paid the full death benefit to the beneficiaries.

If you own a policy on the life of another that has lapsed, but were given no notice of any default in premium payments, the beneficiaries may still be entitled to benefits upon the death of the insured. If you have questions about life insurance benefits after premium payment default, the attorneys at Mathis, Marifian & Richter, Ltd. are here to talk to you.

Professional Services Disclaimer:

Please note that the information presented here is as an educational service, and while it contains information about legal issues, it is not legal advice. No warranty is made regarding the applicability of the information presented to a particular client situation, and the information set forth is not a substitute for original legal research, analysis, and drafting for a particular client situation.

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