Swati bought a life insurance policy in 2014 and ever since then she has been very consistent in paying the premiums until COVID-19. In the first wave of COVID-19, the companies started downsizing and Swati was also laid off like millions of others. She is a single parent and the sole bread-winner of her family; thus, has a heap of financial responsibilities. Since it was taking time for her to find a suitable job, she skipped on a few premiums. Does that mean Swati’s life insurance policy will now lapse and all the premiums paid by her will go down the drain? Let us see what has happened with Swati’s policy and how she can continue with her life insurance premium payment.
Like all the other insurance policies, you need to make the life insurance policy premium payments on a regular interval as well. Only if you keep paying the premiums for your life insurance consistently, you will be able to get the due coverage from it.
What happens if the insurance premium is not paid?
The consequences of discontinuing the payment of your life insurance premium completely depend on the type of insurance plan you have. Let us discuss some types of insurance policies and how does a missed premium may impact them.
- Permanent life insurance: When you have a permanent life insurance policy, it will come with some cash value that will grow with time. In case you do not pay premiums for a couple of months but the policy has sufficient cash by then, that amount can be used for covering the cost of your premiums. This will help in keeping your policy active. If the policy does not have a sufficient amount, it will officially lapse.
- Term life insurance: When it comes to a missed premium payment on a term life insurance plan, you will get a grace period for a term life insurance policy. You can pay the missed premium within the grace period. If you fail to do so, the policy will lapse.
What is a grace period in insurance?
When you buy a life insurance policy, you also get a grace period. If you by any chance miss paying the premium for your life insurance policy, you can use the grace period. Usually, the grace period is of 30 days. You can clear the missed premium within these 30 days to avoid any risk of your policy getting lapsed. If you do not pay your life insurance premium even within the grace period, your policy will lapse.
The grace period of a policy may differ from one insurer to the other. If you are not sure about the grace period that comes with your life insurance policy, you may check it in the policy documents or straightway ask the customer service department of your insurance provider. It is very important that you keep a track of the premium payments for your insurance plan and do not allow for the policy to get lapsed.
What is the LIC premium grace period?
LIC is one of the popular life insurance providers operating in the country. It has millions of people who trust in the company and decide to purchase their life insurance products. When it is about Life Insurance Corporation of India’s premium payment, the grace period is 15 days if you are paying premiums monthly. If you are paying the premiums quarterly, half-yearly, or annually, the grace period will be of 30 days.
Tips to avoid a lapsed policy
If you think you may miss out on paying premiums for your life insurance policy, here are the tips that you can follow:
- Insurance providers mostly send reminders to the policyholders around the payment date. Make sure when you receive any such reminder, you make the payment without making any delay.
- You can sign-up for an auto-debit option. Your premium will automatically be transferred from your account by the due date.
- You can also choose a yearly premium policy. This will help you to stay away from the stress of making monthly payments.
Reinstate old policy vs Buying a new policy
An older policy that has been purchased at a younger age can end up giving the policyholder advantage in terms of the reduced monthly premium amount. The policy may also have other bonuses that you might lose out on. For these reasons, you may consider reviving the older policy.
If you want to get a new policy in its place, you can also consider adding an extra cover to your existing policy or increasing the coverage.