It is impossible to repudiate the significance of a Life Insurance plan in safeguarding one’s financial welfare's. Financial interest extends up to families and the ones dependent upon the insured person’s income. Life insurance is valid until the policy period is active and if premiums are not paid during the grace period, the insurance policy will become invalid. To get a full benefit of life insurance, one must keep paying the premiums as per the given terms and conditions.
However, there are instances where life insurance lapse due to inevitable situations, but it is not necessarily an entire loss. Even when a policy lapses, the life insurance company provides the policyholders to recover their coverage within a given period. This depends on the age and health of the policyholder.
What are the definite conditions related to grace period:-
According to the Insurance Regulatory and Development Authority of India (IRDAI), all life insurance company is bound to allow a 30 days grace period for renewing the lapsed policy. It is mandatory to pay the remaining premium within this period to sustain the policy and claim the cover amount. The policy will be active but payout won’t be an option anymore causing grave loss.
What Happens When Your Life Insurance Policy Lapses:
Whenever a policy lapses, various factors get affected such as:
- Term covers: with the lapse of the policy, the benefits of the coverage amount will end. The premium paid so far will be lost and the company will not be responsible for any payout.
- Traditional covers: If the premium is not paid during the three years term of traditional covers, the policyholder will lose all the premiums paid earlier. They will not get the benefits of endowment plans, retirement policies, life plans, and other crucial coverage.
- ULIPs: ULIPs have particular lock-in period in case of premium payment and premium withdrawal. If premiums are not paid before the lock-in period, the policyholder will lose all benefit covers. However, the premium paid till before will be compensated to the policyholder after the policy matures. More importantly, if premiums are paid till the end of the lock-in period, the policyholder can either stop the policy and withdraw the whole amount or continue it as per the policy.
How to revive lapsed life insurance policies:
A lapsed Life Insurance policy can be revived as per the terms and conditions made by Insurance Regulatory and Development Authority of India (IRDAI). India’s top life insurer LIC has very specific guidelines on how insurance policy revival can be initiated.
To revive a lapsed policy by LIC, it is necessary to pay the outstanding premium along with late fees within 6 months after the deadline of premium payment. After 6 months period, the guidelines for revival of policy may differ.
Things to consider in case of a lapsed life insurance policy:
Unavoidable circumstances can happen anytime in life that may result in the lapse of your policy. The first and foremost damage is a financial loss. So, if any chance you can revive the policy, do it without second thoughts. The premiums paid to the company holds value to your financial securing and loss of policy will result in the loss of premiums paid over years. Delay or failure to pay even a single premium will make the policy suffer and additional charges will be levied during the next payment. Once you have lost the policy and want to revive it, the charges on the premium will be much higher than what was paid earlier. This is based on the present age of the policyholder. More the age, higher is the premium amount. If you still want to recover the policy, you might want to know the costs of a new policy. Sometimes, buying a new policy comes less expensive than reviving and sustaining the old policy. Please research and compare the price listings in both cases and make a wise decision.
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