When you buy something at the grocery store, you likely check the expiration date, right? After all, not everything is made to last, and consuming something that’s expired could result in a bad experience or even illness. Well, expiration dates exist to protect you, but are they just for food products and consumer goods? Can things like insurance benefits expire?
Well, the answer is yes and no. An insurance provider typically lays out the terms of a policy in an agreement commonly referred to as a “contract of adhesion.” Therefore, your policy is a contractual agreement that both parties agree to stick to. The policy dictates the term of coverage and should note when the contract expires and must be renewed.
In most cases, you can allow the policy to expire simply by refusing to pay or expressing a desire to end the policy beyond the date of the last required payment for the contract period. In doing this, you also forfeit coverage, and this could cause you to be left vulnerable to health crises, so it’s usually best to have some type of insurance product lined up and ready to take effect prior to allowing another to expire.
The insurance company could technically allow your policy to lapse by not renewing the policy, but this isn’t usually how things are done. If a provider is no longer able to insure you, notice is generally given in advance alerting you to the fact that your contract is either being canceled according to the provider’s terms or the provider has chosen to allow the coverage to expire with no expectation of renewal.
If the provider is the one making this decision, you may have special rights under your state’s laws governing how far in advance you must be given notice of a cancellation or expected expiration.
Different Types of Insurance Can Change Things
Different insurance products may also expire in different ways. For example, a term life insurance policy typically will have an expiration date at which point the policy will need to be reviewed prior to renewal or extension. This is because the very nature of a term life policy necessitates that the coverage is only in place for a specified term.
Health insurance, on the other hand, doesn’t generally include a specific expiration date, and instead, policies can expire according to the events listed above. Likewise, government-subsidized healthcare coverage like Medicare and Medicaid policies also do not expire unless a life event triggers an expiration. Automotive insurance and homeowner’s insurance policies tend to operate on a term basis, so they will expire unless renewed at the end of the specific term laid out in the policy itself.
Penalties for Insurance Lapsing
One thing to watch out for in regard to lapsed insurance is the potential for penalties. In some situations, allowing your insurance to lapse, or expire, can result in fees or penalties issued by the provider should you choose to seek a new policy with the same provider. Of course, with health insurance, allowing a lapse in coverage can also be detrimental to your health if you require medical treatment and have no coverage in place.
Talk to Your Provider
Because different states have different requirements in place for both insurance providers and insurance policies, you’re encouraged to work with your provider to get answers to any questions involving your policy and expiration. You can also partner with an insurance broker to discuss your specific insurance needs and find a policy that fits those needs.