What is a life insurance coverage gap?

A coverage gap is when you don’t have enough (or any) life insurance coverage. Coverage gaps risk your family’s financial health if you die unexpectedly.

Headshot of Policygenius editor Nupur GambhirAmanda Shih author photo

By

Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

&Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Updated|5 min read

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A life insurance coverage gap happens when you have too little life insurance coverage. If you die during a coverage gap, your dependents likely won’t have the financial support they need to replace your income and pay for bills and everyday expenses. To provide a safety net for your family, you should get life insurance coverage that covers all of your financial obligations and ensure you have coverage in force as long as someone depends on you for support.

Key takeaways

  • To prevent a policy lapse and coverage gap, pay your life insurance premiums within the 30-day grace period.

  • Shop for new coverage at least six months before your current policy’s expiration date.

  • Temporary life insurance coverage ensures you're covered during the life insurance application process.

How coverage gaps happen

Allowing a policy to lapse, expire, or simply waiting for coverage to go in force can all play a role in creating a coverage gap. Here’s what you should look out for — and how you can prevent gaps from happening.

Policy lapse

If you don’t pay your premiums on time, insurers can cancel your policy. There’s usually a 30-day grace period for late premium payments. If you don't pay during the grace period, you’ll lose your coverage.

How to prevent it: Talk to your insurer

If you can't pay your premiums on time, talk to your insurer to see if they have any additional options, like payment plans or extended grace periods, for extenuating circumstances.

If you can no longer afford your premiums, you can lower your death benefit to lower your premiums. Know that if you need to increase the benefit later, you'll need to go through underwriting again.

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Policy expiration

If you purchase a term life insurance policy that doesn’t last as long as your needs — you buy a 10-year policy but have a 20-year mortgage, for example — you’re going to experience a coverage gap unless you replace your coverage in time.

How to prevent it: Get new coverage six months before your policy expires

If your policy is going to expire soon and you still need life insurance coverage after its end date, there are two ways to ensure that you don’t experience a coverage gap:

Term life insurance is more affordable than permanent life insurance, but it may be worth considering a permanent policy if you're older or have a complex health history. Insurers might charge much higher rates or may not be willing to offer you a new term policy. Give yourself time to work with an agent to explore your options.

Delay in policy approval

The life insurance application process can take five to six weeks — sometimes longer if an insurer needs more information to make you a policy offer. That can leave a coverage gap between when you start the process and your policy's start date.

Even if you’ve received the final policy offer from your insurer, your family won’t get the death benefit if you die without signing your policy papers and paying your first premium.

How to prevent it: Get temporary coverage before you get your actual policy

When you apply for your policy, ask your provider about temporary life insurance coverage. It's a limited policy offered by your insurer that pays a death benefit if you die before your policy is finalized.

Each life insurance company treats temporary coverage differently and offers a different maximum death benefit.

Common myths that lead to a coverage gap

When you’re setting up a financial plan for your family, you might come across a few life insurance myths that can lead you to create a coverage gap for yourself. Here are a few of the most common misconceptions that leave people underinsured:

“I don’t need life insurance”

Most people know that life insurance can cover end-of-life costs, such as funeral expenses, and assume they can cover the costs themselves or put off buying a policy. But life insurance is also meant to replace your income so that your loved ones can afford everyday essentials, mortgage payments, and college tuition.

If anyone relies on your financial support or would become responsible for your debts after you die, you should have a policy that can cover your loved ones' needs.

“I don’t need that much life insurance”

If you make $100,000 a year, a $1 million policy might seem like too much for your family. This belief can lead people to buy much less coverage than they actually need. In reality, your coverage should equal at least 10 to 15 times your annual income.

Life insurance is a long-term replacement for your income, so that high death benefit actually accounts for the financial support your dependents will need for decades.

“I already have enough life insurance”

If you split a mortgage or any other expenses with your partner, an unexpected death can strain your finances, even if your employer offers life insurance benefits or you both earn an income.

Your partner may have to work more, dig into savings, or pay for childcare to make ends meet. Meanwhile, employer-sponsored life insurance policies rarely offer the amount of coverage people actually need.

“This is one of the most common mistakes we see,” says Patrick Hanzel, certified financial planner and Advanced Planning Team Lead at Policygenius. “Many people have some form of coverage provided by their employer, but some employers offer a base benefit amount of something like $50,000 or one year’s salary — far less than the average recommendation of 10 times your annual income. These types of benefits are also not portable, so if you leave that employer you risk being left without any coverage at all.”

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Consequences of a coverage gap

It’s important to avoid a life insurance coverage gap for two key reasons: Gaps can put your family’s financial support at risk, or they can cause you to pay more for life insurance than you need to.

Your family wouldn’t get the death benefit

If your policy expires and you die the next day, your family won’t get your policy's death benefit. No matter how little time has elapsed since your coverage gap began, if a policy isn’t active when you die, life insurance companies aren’t obligated to pay out.

You could become ineligible for a new policy

You could face much higher premiums if you’re facing a coverage gap because your policy has lapsed or expired. If your health has worsened since you bought your last policy, it can impact the health classification that an insurer gives you — which means higher premiums — or make you ineligible for life insurance altogether.

Preventing a coverage gap not only protects the financial future of your loved ones, but it also keeps you from paying more for life insurance than you have to.

Frequently asked questions

What is a coverage gap?

A coverage gap is when you need life insurance protection, but don’t have enough (or any at all) in place.

What happens if you have a coverage gap?

If you die without enough life insurance coverage, your loved ones won't have a replacement for any financial support you were giving them.

How do I prevent a coverage gap?

You can prevent a coverage gap by getting a high enough death benefit and long enough policy term length. Temporary coverage and the term conversion rider can also provide security against a coverage gap.

Authors

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

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Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

Editor & Licensed Life Insurance Expert

Amanda Shih

Editor & Licensed Life Insurance Expert

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Amanda Shih is a licensed life, disability, and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

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