Insurance is a contract between an entity and an insurance company where the insurance company agrees to protect against financial losses resulting from specific risks in exchange for premiums. An insurance premium is an agreed amount that the insured party pays the insurance company monthly, quarterly, bi-annually, or yearly. Insurance premiums vary depending on the insurance policy and contractual agreement. Insurance in New Jersey protects individuals, businesses, or organizations against financial losses through policies that offer different coverages. For instance, if a covered event that leads to a loss occurs, the insurance company will pay for such loss or damage within the policy’s coverage limit. In the event of an insured loss, the policyholder will file a claim with the insurance company. The claim should include a vivid description of the events that led to the loss. In addition, proof of loss is required to authenticate the claim. Depending on the policy, the policyholder may have to bear part of the loss by paying a deductible, after which the insurance company will cover the remaining loss.
New Jersey residents can get insurance coverage through private insurance companies or government-funded programs. In 2022, there were 1,352 insurance companies licensed to operate in the state.
All insurance companies selling insurance policies to New Jersey residents are under the regulation of the New Jersey Division of Insurance (NJDOI) within the New Jersey Department of Banking and Insurance (NJDOBI). The New Jersey Division of Insurance:
Oversees the licensure of insurance companies
Reviews the insurance products insurers offer to consumers to make sure they conform with existing regulations
Conducts regular inspections to determine the solvency of insurance companies operating in New Jersey as it relates to their capacity to carry out obligations to their policyholders
Monitors insurance products available in the New Jersey insurance industry
Health Insurance in New Jersey is an insurance product that covers most medical expenses of an insured, including prescription drugs, wellness care, and medical devices. Data from the U.S. Census Bureau shows that New Jersey had an estimated population of 9.3 million people in 2021, out of which over 750 thousand persons under 65 years old did not have proper health insurance. New Jersey residents without health insurance can access healthcare through federal or state-funded health programs like Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). The Medicaid and CHIP programs provided health insurance coverage to over 2.1 million New Jersey residents in 2022.
In New Jersey, eligible persons can purchase health insurance through the New Jersey Official Health Insurance Marketplace from November 1 to January 31 or during the Special Enrollment Period if they meet the eligibility criteria. New Jersey residents who do not qualify for government-subsidized health insurance or do not have employer-provided health insurance can purchase health insurance from private insurance companies. GetCoveredNJ marketplace is a frequent source of insurance for the self employed.
The two categories of health insurance plans in New Jersey are major health plans and supplemental health plans. Major health plans are standard health insurance plans that offer comprehensive coverage for various health issues. Supplemental health insurance plans are specific and have limited coverage. They are not ACA-compliant and do not cover essential health benefits. The table below outlines some of the health insurance plans in the New Jersey healthcare market and their differences.
Health Insurance Market in New Jersey
|Insurance Market||Examples of available Plans|
|Major Health Insurance||
|Supplemental Health Insurance||
Irrespective of how you buy health insurance in New Jersey, you may have to make extra payments. These payments are deductibles, copayments, and coinsurance.
For more information on health insurance in New Jersey, speak with a New Jersey-licensed health insurance expert. You should also consult with a state-licensed health insurance agent before you buy health insurance so they can help you choose the best policy that will meet your needs.
Auto insurance in New Jersey is a contract between a car owner and an insurance company to protect against financial losses resulting from automobile accidents. New Jersey is a no-fault state with over 6 million registered vehicles. Its laws require that all drivers within the state show proof of automobile insurance on demand while driving on public roads. If you need auto insurance for a limited time, you can get short term car insurance.
New Jersey automobile insurance law requires auto insurance to include:
Liability insurance to pay for damages you may cause to other people. The minimum liability coverage for New Jersey is:
Bodily injuries - $15,000 per individual and $30,000 per accident (Not included in the basic policy, but can be an option)
Property damage - $5,000 per accident
Personal Injury Protection - $15,000 per individual (this also covers loss of income and funeral expenses)
Uninsured/underinsured coverage for protection against bodily injuries and property damage in accidents where the at-fault driver is uninsured or underinsured. This coverage pays for ambulance services in addition to medical bills. In New Jersey, you are eligible for uninsured/underinsured coverage if you have a standard auto insurance policy. Unlike the basic policy, the standard policy in New Jersey allows you to purchase UI/UIM coverage up to the amount you choose for liability coverage.
This way, if you have minimum liability coverage, your optional UIM is also maxed out at the same amounts: Bodily Injury - $15,000 per person/$30,000 per accident, Property Damage - $5,000 per accident.
But if you raise the liability coverage amount, the UI/UIM protections can be raised too. The highest amount of typically offered auto insurance coverages are:
$250,000 in bodily injury per individual
$500,000 in bodily injury per accident
$100,000 (or more) in property damage
New Jersey’s minimum-mandated auto insurance limits may be insufficient to cover the cost of treatments or property damages in the event of an accident. Therefore, it is advisable to get coverage with higher protection for the insured and their own vehicle:
Comprehensive coverage pays for all types of damages to the vehicle except those caused by a collision. Comprehensive coverage is the only one that will cover the vehicle if it is stolen.
Collision coverage pays the costs of repairs to the insured vehicle for damages caused by a collision where the insured was at fault. Rear end collision is the most common type of collision, occurring in an average 29% of accidents.
Medical payment coverage pays for medical and funeral expenses that result from a car accident.
Rental car reimbursement pays for the car you rent while your vehicle undergoes repairs.
Roadside assistance coverage pays for fixing flats, towing vehicles, or jumping batteries.
Residential property insurance protects homeowners and renters against losses caused by damage or theft on their residential properties. With nearly 3.7 million residential dwellings across the state, It also covers personal belongings within the insured property. It protects your home from financial losses caused by damages, vandalism, and theft. Residential property insurance includes:
Homeowners Insurance - This provides coverage that pays for the repair or replacement costs of your property or its content after a covered loss event. Homeowners' insurance policies help restore your home to its prior state before the damage. Homeowner insurance covers:
Structural damage to the property by covered perils (also known as dwelling insurance). This coverage also extends to detached structures such as a shed and garage. This coverage is commonly referred to as Hazard Insurance, as it helps to repair the structure from roof hail damage, fire, and other structural damage events.
Personal property damage. For instance, it protects against damages or theft of personal belongings like furniture, clothes, electronics, and silverware within the home.
Liabilities that result from third-party injuries or property damages
Additional living expenses, if the home is uninhabitable due to covered damage, and you have to seek temporary accommodation elsewhere.
Condominium Insurance (Condo Insurance) - covers repairs to your condo and pays for upgrades to the structure (though, importantly, it DOES NOT cover the building itself - which is covered by the condominium master policy). In addition, condo insurance provides:
Personal property coverage to protect your personal belongings such as clothes, appliances, and furniture from damages and theft if they are damaged by a covered peril or stolen
Personal liability coverage for medical bills, cost of repairs, or legal fees that may result from third-party injuries or damages to properties.
Loss of use coverage for the expenses incurred living in a rental home if the condo is uninhabitable due to a covered peril
Loss assessment coverage for damages and liabilities to structures outside your condo unit
Medical payment coverage for some of the treatment costs of individuals injured within your condo
Renters Insurance New Jersey - Renters (tenant’s) insurance protects individuals renting or subletting residential properties against personal property loss and liability claims for third-party injuries and properties damaged on the premises. However, it does not cover damage to the rental structure or dwelling where the tenant lives; the landlord’s insurance covers that.
Landlord Insurance - This is a residential insurance policy for individuals who rent out their homes. It protects the rental unit and covers damage to the physical structure of the building that is caused by fire, vandalism, bad weather, or criminal activity (like burglary). It also covers liability claims from tenants and protects against rental income loss if the insured rental property temporarily becomes uninhabitable due to covered damages.
In New Jersey, residential property insurance, like other property insurance policies, is regulated by the NJ Office of Property and Casualty in the Department of Banking and Insurance.
With over 3.7 million housing units and an estimated 2.4 million owner-occupied housing units in New Jersey between 2016 and 2020, the need for residential property insurance is evident. For example, the table below shows the percentage of residents for the most populous (Bergen County) compared with the state average, and the counties with the least and most renter-friendly properties:
Residential Property Statistics in New Jersey
|County||Percentage of Homeowners||Percentage of Renters|
|New Jersey State Average||64%||36%|
Effective November 3, 2022, all landlords and business owners in New Jersey are required to have a $500,000 liability coverage. This covers third-party bodily injuries and death on their properties or business premises. Also, small multifamily properties put up for rent must have a minimum of $300,000 liability coverage.
Whatever residential property insurance you seek in New Jersey, contact a state-licensed property insurance agent to advise you on what plans will provide adequate coverage for your property. An agent can also help you compare quotes and get the most affordable plan.
Commercial insurance protects businesses against various types of risks. It covers claims that may result from property damage, lawsuits, customer or employee injuries, cyber attacks, and theft. Workers’ compensation is required for all New Jersey businesses that have employees, including seasonal and part-time.
Nearly a million businesses in New Jersey employ close to 4.2 million people in 2022. There are different types of commercial insurance policies a New Jersey-based business can choose from based on its needs, as outlined in the table below.
|Commercial Insurance in NJ||Plan’s Benefit||Types of Policies (examples)|
|Commercial Property Insurance||Protects against damages to a business’s physical assets.||Commercial Auto Insurance - Protects the business’s vehicles from financial losses arising from covered risks.
Inventory Insurance - Covers against damage to the insured business’s inventory.
Inland Marine Insurance - protects the cargo being shipped between locations.
|Commercial Liability Insurance||To protect a business against liability claims resulting from third-party injuries and property damage or a data breach.||Product Liability Insurance - Protects a business against financial losses resulting from claims or litigation due to injuries or damages caused by its products
Professional Liability Insurance - Protects individuals who offer professional services from claims and litigation that may result from their actions or inactions
Commercial Crime Insurance - For protection against financial losses due to business-related crimes like employee-related thefts, robbery, and forgery
Workers’ Compensation Insurance - Covers job-related injuries and illnesses, death benefits, partial replacement of lost wages, and disability benefits of workers
Cyber Liability Insurance - For protection against data breaches, ransomware, and other cyber security issues.
|Commercial Health Insurance||This combines all types of private health insurance that is offered by an employer to its employees or by a group to its members. The organization purchases the coverage and offers it to its member group at a discounted rate.||Health insurance for Self-Employed - Typically purchased by single-member businesses.
Group Commercial Health Plans - Employers use healthcare service providers to offer health coverage to employees and their dependents at lower costs than non-group health plans. In New Jersey, some group commercial health plans are:
|Commercial Life Insurance||Provides life coverage for employees, executives, and business partners||Group Life Insurance - Offers life insurance to all employees of the company or the members of the sponsoring organization.
Key Person Insurance - Insures the life of a key employee or executive. The death benefit of this plan is used to cover the costs that the company must spend on replacing the insured individual if they die while employed by the company.
Buy-Sell Agreement Life Insurance - Shareholders of partnership businesses use this insurance plan to protect their businesses against the financial loss caused by a business partner’s death. The death benefit of buy-sell agreement life insurance is typically used to buy out a dead partner’s shares from their beneficiaries.
Business owners can save on the cost of insurance by bundling commercial properties and liability risks into a business owner policy (BOP). Consult with a knowledgeable NJ-licensed commercial insurance agent who can help you assess your business insurance coverage needs, advise you on the policies to purchase, and help you get insurance quotes that are tailored to your business’s needs.
The main purpose of life insurance is to pay a death benefit to an insured person’s beneficiaries when the insured person dies. Besides the death benefit, life insurance has a myriad of uses for the insured throughout their life.
New Jersey residents can choose any policies under term life or permanent life insurance plans. Term life insurance policies offer protection to the insured for a specified period, and the beneficiaries receive death benefits only if the insured dies within the policy's active period, typically between 10 and 30 years. Meanwhile, permanent life (cash value) insurance lasts for the insured's lifetime and after, and has extra perks.
The most common types of life insurance in New Jersey are:
|Temporary Life Insurance||Term Life Insurance|
|Permanent Life Insurance||IUL Insurance (Index Universal Life Insurance)|
|Final Expense Life Insurance|
|Whole Life Insurance|
Life insurance in New Jersey does not benefit only the beneficiaries. An insured can access part of the policy’s benefits as living benefits through the savings component of permanent life policies. Living benefits can also be accessed through optional riders (as in the case of term-life policies that do not have a cash value component). Living benefit riders are features that allow an insured to have access to some of the benefits of their life insurance policy while alive if they fulfill the specified conditions. Some riders cost extra, while others may be added at no additional cost - ask your agent how.
An insured can use life insurance to save for retirement by investing money from the cash value savings and investment component of permanent life policies. Also, it can serve as a source of tax-free income through loans against the savings component.
The table below outlines the types of living benefits available to life insurance policyholders in New Jersey
|Type of Life Insurance Plan||Some Available Riders and their Living Benefits|
|Term Life Plans and Permanent Life Plans||Return of Premium - allows the insured to recoup the premiums paid in for the policy during its term if the insured outlives the term.
Guaranteed Insurability - guarantees that the insurance company will allow a new term of coverage without having to retake a medical exam
Accelerated Death (Terminal Illness) Rider - The insured qualifies for a payout if clinically diagnosed with a terminal illness like cancer
Long-Term Care Rider - If an insured activates this rider, their insurance company will pay for the expenses incurred in committing the policyholder to long-term care if they are unable to perform two out of the six daily living activities (DLA) unassisted. The DLAs are:
|Permanent Life Plans Only||Cash Value Withdrawal - Permanent life plans allow policyholders to make cash withdrawals from their cash value savings and use them when in need.
Policy Loans - A permanent life insurance policyholder can borrow money from the cash value savings of their policy - typically tax-free. Insurance companies subtract such loans from the death benefit they pay to beneficiaries if the insured does not pay them back.
The death benefit of a life insurance policy can help residents of New Jersey to:
Secure a mortgage
Pay for tuition
Take care of daily expenses
Pay off debts left behind by the insured
Cover the funeral expenses of the insured
In addition to individual life insurance, insurers also offer commercial life insurance whereby businesses can use life insurance to meet needs. For example, a business can leverage the following commercial life insurance plans for employees and management protection:
Group Life Insurance - Businesses offer this type of life insurance as an incentive to employees. The death benefits of this policy go to beneficiaries of the insured if they die while employed by the business. Group life insurance typically offers low benefits and ends after the employee or member leaves the organization (unless otherwise agreed). Because of this it is usually referred to as supplemental life insurance, since it provides coverage in addition to the main individually-purchased policy.
Key Man (Key Person) Life Insurance - This type of life insurance covers the risk of losing an important employee or executive. A business may use the death benefit of a key person's life insurance policy to hire or train a replacement for the insured.
Business Continuation Insurance - In partnership businesses, business partners may include life insurance in their buy-sell-agreement, to insure each partner, and list the business as the beneficiary. The business may use the death benefit to buy out the insured's shares of the business when they die.
Before you purchase life insurance, speak with an NJ-licensed life insurance agent. Irrespective of the type of life insurance you seek, a knowledgeable state-licensed life insurance agent can advise you on what life insurance plan will meet your needs.
Once you determine the type of policy that fits your needs, check multiple quotes from competing insurance companies to get the best rate.
Disaster (or Catastrophe) Insurance protects real estate properties against natural and human disasters. In New Jersey, you may need to combine disaster insurance and residential or commercial property insurance. Disaster insurance covers the perils typically not covered by your residential insurance coverage, such as:
Flood and Mudflows
Note: Windstorms and Tornadoes are covered by standard residential property insurance: homeowners, landlords, renters, and others.
New Jersey’s Atlantic oceanfront of 127 miles in addition to networks of interior rivers, makes this 1,800 of combined coastline particularly susceptible to floods, storms, and hurricanes. 53% of New Jersey's population live in the coastal areas, putting their properties at high risk of coastal tidal flooding, stormwater flooding, and storm surge. The table below outlines some of the major catastrophes in New Jersey’s history and shows the need for disaster insurance.
|Type of Disaster||Name and Year of Occurrence||Cost of Property Damages|
|Storm||Superstorm Sandy October 29, 2012||Superstorm Sandy was one of the biggest natural disasters in New Jersey’s history, with property damage estimated at $30 billion|
|The Perfect Storm (The 1991 Halloween Nor'easter) October 28, 1991||$75 million in property damages to South New Jersey|
|Hurricane||Hurricane Irene August 27-30, 2011||Over $1 billion in property damages|
|Somerset County: Hurricane Floyd September 1999||$100 million in property damages|
|Flood||Burlington County Flash Flood July 2004||Over $50 million in property damages|
|Explosion||Camden County paint factory explosion July 30, 1940||Over $2 million in property damages|
|Fire and Flood||Passaic County Paterson fire and flood 1902||$6 million property damages|
New Jersey residents can purchase flood insurance through the National Flood Insurance Program (NFIP) to protect their properties from floods. The NFIP is a partnership between the U.S government and local communities that allows property owners to purchase up to $250,000 and $100,000 coverage for their buildings and their contents, respectively.
For information on how to buy disaster insurance in New Jersey, speak with an NJ-licensed property insurance agent. A knowledgeable state-licensed property insurance agent will explain the benefits of disaster insurance and guide you in choosing the best plan for your location.
Insurance is a contract between an insurance company (or a government agency) and an individual, a business, or an organization to provide guaranteed compensation for specified losses. In New Jersey, entities make monthly, quarterly, bi-annual, or annual premium payments to insurance companies for coverage against losses from future perils. The premium paid for coverage is the cost of insurance. If a loss occurs from a covered event, the insurance company will bear part or all the cost up to the limit specified in the contract.
To be protected against losses, the insured entity must not default in paying premiums when due. In addition to premiums, and depending on the type of insurance, the insured may have to make out-of-pocket payments. These payments are:
Deductible - This is the amount a policyholder must pay for covered losses before the insurance company steps in to take on their part of the cost. A deductible can be based on a percentage of a value or a specific dollar amount. It can also be a specific period of time that the insured must cover their own losses, until the insurer steps in.
Copayment - This is the amount a health insurance policyholder pays for visits to an in-network doctor or a physician
Coinsurance - This is the percentage of the medical cost you have to pay for health insurance after spending up to the deductible until you reach your maximum out-of-pocket expenses.
If a policyholder files a claim for a covered peril that meets the policy’s provisions in the contract document, the insurance company is obligated to honor the claim within the policy’s coverage limit. Seek insurance advice only from knowledgeable insurance professionals licensed by the state of New Jersey.
An insurance claim is an application by a policyholder to an insurance company for compensation for losses covered under the policyholder’s insurance plan. For an insurer to honor a claim, the insured must fulfill the following conditions:
There must be no outstanding premium payments
The claim must be a covered claim (for losses that have protection under the insurance contract)
The policy on which the claim is based must be active
The claim must be filed by the policyholder or a legally recognized representative
The claim must be filed within the time frame specified for claim filing
To file an insurance claim, a claimant must give a vivid description of the events that led to the loss and provide documents (where necessary) to support such a claim. Claim filing methods may differ depending on the insurance company. However, a policyholder can file a claim:
Through a phone call to dedicated phone lines
By filling out a claim form online on the insurance company’s website
By downloading a claim form, filling it out, and mailing it to a provided address
By an in-person visit to the insurance company’s office
The insurance cost is the premium a policyholder pays for coverage, which can be a monthly, quarterly, bi-annual, annual, or single payment to the insurance company. The amount policyholders pay as premiums may vary depending on the insurance plan or policy type. Also, the premium for similar policies may differ for different insurers. In determining the cost of insurance, insurers engage the services of underwriters to calculate the risk of providing coverage under a policy. Underwriters calculate the cost of insurance by considering:
Age - The age of a life insurance applicant determines how much an insurer will demand to provide coverage. Older persons pay more for life insurance policies, while older vehicles are typically less expensive to insure
Location - For instance, properties in areas with high crime rates or properties in disaster-prone areas will pay more for commercial crime and disaster coverages
Type of coverage
Amount of coverage
Personal information (this depends on the type of insurance). For instance, insurance companies may consider the applicant's medical history for health coverage or the number of employees for commercial liability or auto insurance policies.
Before buying an insurance policy, speak with an NJ-licensed insurance agent who has access to different types of savings bundles to compare. Agents who have access to many insurance companies can help you get lower premium rates for coverage.
There are various ways insurance companies raise money to pay claims in New Jersey. Typically, policyholders pay insurance premiums for coverage in the event of losses resulting from covered events. However, premiums may not be enough to cover administrative costs and pay for claims. In addition to premiums, insurance companies raise money for claim payments:
By investing part of the premium for profits
By charging surrender fees for policy cancellations
By using profits made from the cash value component of permanent life policies
Through forfeited premiums of expired term life policies
Through the investment of premiums of insurance products such as annuity plans
Insurance companies in New Jersey can also pay claims through reinsurance coverage. Reinsurance is an arrangement where an insurance company shares part or all of its risks with another insurer - in effect insuring the losses of one insurance with another.Reinsurance reduces the impact of losses due to claims on an insurance company.
If an insurance company in New Jersey goes bankrupt, a court of competent jurisdiction will liquidate the company and appoint a receiver (liquidator). The liquidator will assess the insolvent insurer’s assets and liabilities and report back to the court. After the assessment, the insurance guaranty association to which the insurance company is a member will take over its obligations to policyholders.
An insurance guaranty association will settle covered claims of the policyholders of its insolvent members up to the limits stated in the New Jersey Property-Liability Insurance Guaranty Association Act. If an insurance company is declared insolvent and a policyholder decides to continue with a policy, the guaranty association may transfer such policy to a more capable insurer for continuation. Typically, all registered insurance companies in New Jersey are members of either the New Jersey Life and Health Insurance Guaranty Association or the New Jersey Property and Liability Insurance Guaranty Association. All accident, life, health, and annuity insurance companies operating legally in New Jersey are members of the New Jersey Life and Health Insurance Guaranty Association. The New Jersey Property and Liability Insurance Guaranty Associations also cover other entities administering funds in the state. These entities are:
The New Jersey Property and Casualty Insurance Guaranty Association (NJPLIGA) - All property and casualty insurance providers in New Jersey are members of this association. In the event of the insolvency of a member, the NJPLIGA will take over the obligations of the members to its policyholders.
The New Jersey Surplus Line Insurance Guaranty Fund (NJSLIGF) - The NJSLIGF pays for covered claims of policyholders of insolvent surplus line insurance companies in the state.
The Unsatisfied Claim and Judgment Fund (UCJF) - The UCJF pays claims of victims of hit-and-run accidents involving uninsured motorists. It also provides Private Passenger Pedestrian (PIP) coverage for the uninsured
The Workers’ Compensation Security Fund (WCF) - The WCF protects policyholders of insolvent workers’ compensation insurers in the state; it pays for valid claims or death benefits of workers’ compensation policies of insolvent member insurance companies.
New Jersey guaranty insurance associations are non-state-funded associations that raise funds through the assessment fees paid by their members. In addition, extra funds are raised by disposing of the estates of their insolvent members.
Insurance company ratings in New Jersey indicate an insurer’s ability to meet its obligations to policyholders. When shopping for insurance products in New Jersey, a consumer will likely prefer to purchase from an insurer with good financial backing. Rating companies employ different techniques to determine the solvency of insurance companies selling insurance products to consumers within the state. However, assessment considerations may include:
Market presence, diversification, and competition
Some of the major insurance rating companies in New Jersey include:
Insurers with the highest safety ratings get A+ rating, while the lowest may get an E- rating. A higher rating indicates that an insurance company can meet the needs of its policyholders. Due to the possible differences in rating methods, ensure you verify insurance companies' ratings with two or more rating organizations before making purchases. To guard against insurers’ incapability to meet obligations due to insolvency, insurance companies must meet certain standards before being approved by the New Jersey Department of Banking and Insurance. In addition, insurance companies operating in New Jersey must belong to at least one of the state guaranty associations to protect their policyholders in the event of bankruptcy. A list of all registered insurance companies in New Jersey is available on the New Jersey Division of Insurance website, or you can call 1 (800) 446-7467 for information.
Insurance companies make profits in the following ways:
XYZ insurance company’s underwriting profit = $3 million ($15 million - $10 million - $2 million).
Investments - Insurance companies make money by investing policy premiums in the financial market. In New Jersey, insurers may invest in bonds, mortgages, stocks, and short-term investments to raise money to pay for claims. Due to the high risks of the financial market, insurance companies do not invest all of their portfolios in stocks. Most property and casualty insurance companies in New Jersey invest only a portion of their holdings in common stocks. Bonds are a more predictable form of investment, but they make fewer average returns than long-term stock investments. For example, if an insurance company invested $100 both in a bond and stock in 1930, the return in the present may amount to $7,000 (bond) and $320,000 (stock).
Cash Value Policy Cancellations - When policyholders of permanent life insurance cancel their policies to access the cash value savings, they forfeit the premium paid, and the insurance company is no longer obligated to pay death benefits. Alternatively, if the owner of cash-value life insurance does not use up the saved cash value while alive (for living benefits), the insurer keeps the cash value and uses it to partially or fully pay out the prescribed death benefit.
Coverage Lapse and Policy Cancellation Penalties - To have coverage under a policy, policyholders must pay premiums. If a policyholder fails to pay the premium when due, the insurance company will notify them and give a grace period for payment. Failure to pay the premium within the grace period will lead to the insurance company canceling the policy, and the insured will forfeit the premiums paid for coverage to the insurer.