Anyone have any expertise on Life Insurance? What happens to the monies invested once a policy lapses?

When a policy lapse, the insurance company will use the cash value to pay for it. While that may sound good, your friend is borrowing money from the face amount is she don't pay the missed premium(s) back. Monthly interest will incur on the loan and she will have to pay this as well.

For example, lets say your friend has $100,000 coverage. Her annual premiums is $800. Loan interest is 6%. By the end of month 1, she will owe $804. Her face amount will be reduced by the amount she owe, which will be $99,196. By the end of month 12, she will owe $849.34. When her next bill come, she will owe $800 plus $849.34. If she don't pay them, she will owe $1657.59 by the end of that month. This money will be deducted from the cash value. When the cash value hits zero, the amount she owe will be very high if she still want to keep the policy.

Remember, face amount of the policy will be reduced by any missed premiums and any loans taken from the cash value.

If this was term insurance, the policy will automatically be canceled if you don't pay your premiums by the end of the grace period.

If it was a 'Whole Life' policy ti has some cash value after 10 years. Normally, when the policy lapses for nonpayment, the insurance company automatically converts it to a 'term' policy in the same amount. How long that remains in effect is determined by the cash value. There will be a chart in the first couple of pages of the policy that breaks down how much cash value the policy has per year of premium payments.

If it is a 'Term' insurance policy, it is gone for good and so are all the premiums. Term policies have no value once they lapse.

They'll let you reinstate. Are you asking the insurance company or the agent? That may make all the difference in the answer to your question. Call the insurance company directly. They'd let you reinstate even 3-4 months later subject to some basic underwriting. The agent may tell you to apply again so they can get paid again. BELOW ANSWER IS WRONG....(and she doesn't sell life insurance)...I could have reinstated a policy for a client that had lapsed more than 6 months earlier. The issue was by the time he paid the back premium it didn't make sense. SO, figure out if it makes sense or just buy a new one. But, don't just buy a new one because someone says you can't reinstate because you likely can.

She should definately call and check. If she wants to keep the policy going she may still have time. Most companies will let you sign a reinstatement request. The request will ask some basic questions about your health and as long as there hasn't been any major changes since the policy was written they should reinstate. Without knowing what type of policy this was, there is no way to know if there is any cash value there. If the policy was written 10 years ago its a good time to make sure that they have the correct mailing address just in case.

if its term insurance and has no cash value or dividends to pay premiums she gets nothing. if it is permanant insurance and has cash value the automatic feature is extended term insurance paid for with the cash value. she has to request the cash value in the policy if she elects to receive the cash value that has been built up over the past ten years. have her contact her agent or the company. insurance companies have tons of money that could be paid to benificaries who have never made claims for the death benefit of the extended term insurance.

Once a policy lapses, it is gone.

If it is term, the premium hasn't been paid, and coverage lapses.

If it is permanent coverage (whole or universal life), the policy remains in force until the cash value is insufficient to pay policy expenses.

In either case, once it is lapsed there is no value.

Life insurance with cash value don't pay out cash value when you die! They say its a good way to build savings! How is that so if you lose it all and it doesn't go to anyone when you die? People say you can borrow it. Why do I want to borrow my own money that I paid for? Cash value = scams!