Life Insurances 238 views
When you cannot pay the premiums within the stipulated time frame including the grace period, there is no denying on the fact that your life insurance policy can lapse. Moreover, when your policy lapses, it is obvious that the benefits attached with it will also become inactive. Let's try to understand this thing with the help of an example below:
Rahul Verma was working with a leading MNC, but recently all of a sudden he lost his job. And, this thing gave rise to financial constraints, and as a result of which he was no longer paying the insurance premiums regularly. In fact, this gentleman did not pay the premium within the given grace period, and hence his policy lapsed. Moreover, according to the IRDA recommendations a uniform grace period of 30 days can be extended for quarterly, half-yearly and annual renewals, and a grace period of 15 days for monthly renewals. In fact, when the cash surrender value is exhausted, also a life insurance policy can be lapsed.
Lapse of a Life Insurance Policy
After an insurance policy gets lapsed, the protection shield which comes with it also ends. Thus, this thing shows that the beneficiaries will not get the payment now in case of unfortunate demise. Moreover, the money which was paid as a premium is now forfeited. More to the point, if you don't want to lose the benefits which come with insurance policy, you should revive your life insurance policy within the stipulated time laid down by the life insurance company, before your contract matures.
Reviving the Life Insurance Policy
However, one thing that needs to be mentioned here is the fact that when it comes to revival procedure, it varies across policies as well as life insurance companies. Moreover, if you have not paid the premium for six months, in case with LIC, it will charge you with the 8% interest on the premium for the deferred payment, and your risk cover gets extended for six months. Furthermore, it means that being a policyholder if you somehow you have defaulted on the premium payments for six months, your life cove is still valid/available. Yes, but you can avail this benefit only when you have paid the premium for at least a minimum time period of 3 years. If you are willing to revive the policy in the 7th or 8th month, you need to give a personal health statement.
However, one of the prime reasons of buying a life insurance policy is to give the financial support to the family, after your unfortunate demise. But, all your efforts can go waste, if the policy lapses. So, if you want to revive your insurance policy, below are the few points that you always need to keep in mind:
When it comes to reinstatement of the policy or the documents attached, the revival process will solely depends upon the time between the date of lapse and date on which you have requested for the revival.
Paying the Right Premium
In order to revive the lapsed policy, you need to pay the unpaid premium along with the interest which is specified by your insurance provider. However, in many cases, you also need to pay the penalty.
Processing of the Policy
In majority of the cases, the insurance providers demand the certificate of insurability or health certificate. In addition to, you also need to submit the address proof documents along with this statement.
New Terms and Conditions Can be Imposed
Yes, because revival is nothing, but actually a new or fresh contract between you and your insurance company, thus the insurer may impose some new terms & conditions.
Useful Tips to Avoid Lapse of a Life Insurance Policy
- Opt for an Electronic Clearing Service (ECS)
With the help of this service, you can give a standing order to the respective bank in order to deduct a specified amount for your life insurance policy.
- Pay through ATMs
Many insurance companies these days have tie-ups with many banks where you have the facility to pay for the premiums via using their ATMs.
- Choose auto-pay service through your ATM card
Moreover, if you opt for this service, your policy premiums will automatically get paid through credit card which will reflect in the billing cycle of your card.
- Weigh your Resources
It would be advisable to weigh your resources, before you buy a life insurance policy because you need to ensure that it should create a hole in your pocket.
If somehow your life insurance policy lapses, it would be advisable that you should have an open discussion with your agent or company for the best course of action.