Sahil bought a life insurance policy a couple of years ago from the Life Insurance Corporation of India (LIC). However, due to COVID-19, Sahil had to go through a lot of financial crises because of which he could not be consistent with the premium payment. Although he had a LIC premium payment grace period of 15 days from the due date, he could not arrange money to pay the premium. Does this mean Sahil will lose all the premium amount that he paid under his life insurance policy so far?
Well, it is not only Sahil but the story of many of us. Due to COVID-19, many people had to deal with tough financial situations and also had to cut off many of their luxuries and even premiums for the insurance policies that they bought to protect their life and also their loved ones. If you too are in a similar situation, let us discuss what happens if the insurance premium is not paid and all the other things related to it.
What is a Premium Paying Term?
Also called the policy premium payment term is basically the total number of years that you will pay the premiums for the policy that you have bought. Whether you buy a life insurance policy, a health insurance policy, or a term insurance policy, you have to keep paying premiums till the time your policy is matured.
Whether you are looking for a grace period for term life insurance or a health insurance policy, almost all types of insurances come with a model of grace period for 30 days from the due date. If you cannot pay the premium within the grace period, the policy gets lapsed.
When you buy a life insurance policy, you need to know about certain things related to the premium payments. Here are some of them discussed below:
5 Things you should know about Paying Life Insurance Policy Premium
1. Discounts on the basis of frequency of premium payment
The premium of a life insurance policy can be paid on a monthly, quarterly, half-yearly, or yearly basis, depending upon the type of life insurance policy you are buying. However, if you pay monthly premiums, you will end up paying more money than a one-time premium payment. In fact, if you choose to pay a one-time premium, you will also get an attractive discount, which is called a rebate.
2. An additional premium for high-risk insured
If you have any health condition, you might get charged an additional premium. In some of the situations, an additional premium has also been charged when the insured is a part of a risky occupation. Apart from these, if you get an additional rider along with your basic policy, you would be required to pay an additional premium.
3. Discounts on Online Payment
Each time you pay the premium for your policy, you will be charged a certain servicing cost by the insurance company. However, if you make the payment online, you will be able to avail of the rebate. The servicing cost for the payment of premium of an insurance policy is lower when paid online as compared to offline payment.
4. Non-Payment of Premium
If you are in a situation in which you are not able to pay the premium for your life insurance policy, you can use the grace period. If you cannot make the payment even in the grace period, there are higher chances that your policy will get lapsed. The grace period is mostly 30 days from the due date. Even if you pay within the grace period, you will not have to make payment for any additional charges. Well, you need to keep in consideration that the grace period of a term insurance policy is 30 days even if you pay monthly premiums. For all the other insurance policies with monthly premiums, the grace period is 15 days, after which your policy will lapse. For other modes such as quarterly, half-yearly, and yearly, you will get a grace period of 30 days.
5. Tax Benefit on Premium Payment
Under Section 80C of the Indian Income Tax Act, the premium paid for a life insurance policy is eligible for deduction. However, the clause says that the deduction will be applicable only if you pay the premium for a policy that you took for providing protection to yourself, your spouse, and your children who are dependent on you.
These are some of the points that you must know about paying premiums for a life insurance policy.