Why should you not let your Life Insurance Policy lapse?
A Life Insurance Policy will offer you ultimate protection by taking care of all your financial needs of your dependent family members in case of your untimely death. The purpose of insurance is to protect your loved ones’ interests and safeguard them from financial difficulties in your absence.
But at the same time, you also need to pay renewal premiums on time so that your policy doesn’t lapse. If there is a lapse, then you may not raise any claims against your policy. You can’t also revive your policy till a certain period.
Insurance Lapse Meaning
The lapsation meaning in insurance is when the policyholder does not pay the premium payments, then the policy lapses and no benefits are paid to the policyholder.
If you don’t renew your policy even after the grace period, then your purpose of purchasing a policy will not be fulfilled. Before your renewal date, insurance companies check your life insurance policy details and send reminder emails and messages so that you don’t forget to renew it. If you fail to pay your premium within the due date, insurance providers will offer a grace period of 15 days (for monthly premiums). If you pay your premium on a quarterly, half-yearly, or yearly basis, you may get a grace period of 30 days.
Also Read : Steps to activate a lapsed life insurance policy
Grace Period to Lapse
If you don’t pay the premium during the grace period, then your policy will lapse. This means you can’t enjoy all the benefits that come with your policy. Some insurance companies may conduct special campaigns to reinstate lapsed policies. But as a policyholder, you also have to check the policy details like LIC policy details and contact your insurance provider to revive a lapsed policy like a LIC lapsed policy. Your insurance provider will guide you about how to revive the LIC policy that has lapsed. You can also approach your insurance company to learn about the ways to retrieve LIC lapsed policy refunds.
A policyholder should remember that the policy remains active during the grace period. So, if the policyholder suffers due to any of the insured events during that period, the beneficiary can initiate the claims and all other benefits related to the policy.
To promote the importance of life insurance policies and minimize the gap created by insurance agents, the insurance regulator has decided on certain norms. According to these rules, insurers should allocate orphan life insurance policies to individual insurance agents whose registration is still active. The insurer will inform policyholders regarding the details of allotted agents.
Reviving the Cover
For a life insurance policy, insurance companies provide a restoration period of two to five years to revive the policy. The Insurance Regulatory and Development Authority of India’s (IRDAI) guidelines specify that all life insurance policies underwritten before 2019 should have a maximum revival period of two years. Besides, the policies underwritten after 2019 will have a maximum revival period of five years. After this period, the policy will be terminated. If the insured person doesn’t pay premiums during the grace period and the policy lapses, then the policyholder will not get any coverage. He/she won’t get any death benefit against the policy. But once revived, the benefits will start again.
A policyholder should go through the documents where the criteria of reviving the lapsed policy and contact information with the insurance provider are mentioned. To recover a lapsed policy, the policyholder needs to sign a standard revival form. He/she may need to submit all proof of continued insurability and may have to conduct medical check-ups at a designated healthcare facility of the insurance company.
After the acceptance of the lapsed policy for revival, the policyholder needs to pay the premium amount for all the years starting from the lapse date policy along with interest on outstanding premiums, taxes, and the non-payment penalty amount. The renewed policy may possess new terms and conditions. If there occurs a situation where the policyholder dies and the policy lapses without surrender value, then the insurer will settle the claims accordingly.
Some policyholders may think to purchase a new policy instead of reviving the lapsed one. But you must remember that your premium will be on the higher side for the new policy as compared to the old policy. Because the premium amount depends on the insured policyholder’s age and health conditions. You will also lose accumulated bonuses in the lapsed policy.
To pay your premiums on time, set notifications to your electronic devices so that you never miss your renewal payments. This will ensure you will pay your insurance premiums on time and the policies don’t lapse.
Why is Life Insurance necessary?
Most people who have purchased life insurance policies like an SBI Life Insurance Plan are not willing to revive the policy because of ignorance or they put insurance on their least priority list. But life is full of uncertainties and emergencies occur without any notice. Most people realize later what this negligence costs them. If you can’t afford to pay your premiums at once, you can select monthly or quarterly payments options. This may increase your premiums marginally, but still, you can manage any uncertain situations.
Remember, if you plan properly, a life insurance policy can protect your family members in case of any contingencies. Thus, it’s your utmost responsibility to pay your insurance premiums on time to enjoy the continuity of your policy.