Insurance Policy gets a lapsed status when the premiums are not paid even after grace period. Either the purpose of insurance stops or gets reduced depending on type of Insurance plan.
In participating plans, benefits are reduced on the basis of paid up value. In ULIP plans, paid premiums move into discontinued funds but purpose of insurance i.e., death cover stops with immediate effect. In non-participating plans, purpose of insurance i.e., death cover stops.
However, these policies can be revived as per terms and conditions of policy.
Revival of Life insurance lapsed policy
Usually, a life insurance lapsed policy can be revived within 90 days. Many times, companies run special scheme to revive these policies. Companies reinstate these policies after collection of pending premium, interest and Health Declaration form. The revival conditions may differ depending upon the policies of the insurance companies.
How to avoid policy lapse?
- Make premium payments on time: Pay your premium on time or before the due date to avoid policy lapse. If you fail to make the premium payment on the due date, a grace period will be given by the insurer. Pay the premium money within the grace period.
- Set a reminder: You can set a reminder on your phone or keep a tab of the due date in your diary so that you can pay the premium amount on time.
- Auto Debit feature: You can opt for an auto-debit feature so that premium payments are made automatically on time.
- Update your communication details: Insurance companies send a reminder to their customers via letters, emails or text messages about premium payments. Keep your contact details like current address, permanent address, phone number, e-mail ids etc., updated with your insurance company so that you can get timely reminders and can pay your premium without any delay.
You should be aware about the lapse status and revival of policy there are people who might take advantage of your innocence, and try to mis-sell policies by offering you to get claim money from your lapsed policies.
A similar case where a customer was unaware of policy revival option for his lapsed policy (life insurance) and was mis-sold new policies:
Mr. Navneet Chopra was mis-sold three insurance policies by someone on WhatsApp. That person gave a false assurance that Mr. Navneet could recover money from his previous lapsed policies if he purchases three new insurance policies. He was lured by such an offer and bought three policies hoping to receive the claim amount from the previously lapsed policies. He stated that he was getting constant updates from the person that he would get the claim money in some days. He waited for his claim amount for almost a year. On March 2, 2022, he contacted Insurance Samadhan for the case. We guided him and resolved his case by May 23, 2022.
Things to Remember
- Pay your premium on or before the due date.
- If you fail to pay the premium on the due date, you have time till the grace period. Make premium payments within the grace period.
- Contact your insurance company, if you want a policy revival for your lapsed policy. Do not get trapped by fake calls, emails or text messages trying to mislead you.
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