What Happens if you Stop Paying Life Insurance Premiums?

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Rohan is a businessman and the kind of person who believes in securing the future of his family. Therefore, he puts money into all the possible things that can give him a good return or something that he can use during an emergency. So, he bought a life insurance policy. During the pandemic, his business was hit badly and it got so worse that it became impossible for him to continue paying the life insurance premium each month. Now that he is unable to pay the premiums, he is wondering what happens if the insurance premium is not paid. Will he lose out on all the premiums that he has paid so far? Can he start paying the premiums after a break?

Well, Rohan is not the only person who is going through such a hard time and wondering about the consequences of not paying life insurance premiums. Many people are in the same boat. Before we start discussing the result, let us first understand the concept of life insurance premiums.


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What is a life insurance premium?

A life insurance premium is the amount of money that you pay to your insurer to continue your life insurance plan. It is actually the cost of the coverage that the insurance company provides you when you claim the sum assured.

What is a premium paying term?

The premium paying term is the total number of years that a policyholder has to pay premiums for the insurance plan that he/she has bought.

Also Read:  7 Important Tips For Buying Life Insurance For The First time

Can I stop paying life insurance premiums?

Once you buy a life insurance policy and wish to get the coverage and benefits of the policy, you must keep paying the premiums until the term of the policy is over.  There are higher chances that if you stop paying premiums for the insurance plan you have bought, your insurer might even terminate your policy. Nevertheless, in the policy lapse, several factors play a vital role. An important factor to shed the light on is the type of policy you have bought. Let us talk about it a little more.

  • Term Insurance: If you have purchased a term insurance plan, and you happen to not pay the premium timely, the policy will lapse. Along with this, you will lose all the insurance benefits as well as the premiums that you have paid.
  • Unit-Linked Insurance Plan: If it is a ULIP, and you are inconsistent or stop paying the premiums in the first five years, your policy will lapse. However, the benefits that you would have got from this policy on continuation will be shifted to a discontinuance fund.


What is the maximum time limit to pay?

As per the Insurance Regulatory and Development Authority of India (IRDAI), you would be required to serve a grace period of around 30 days from the date that is mentioned to pay the premium. The 30 days period is for every insurance plan. Therefore, even if you are paying your insurance premium within that 30 days, it is fine with the insurance companies.

Also Read:  Claim Settlement under Life Insurance

The reasons for a delay in the payments can be many. This grace period is helpful for the policyholders as they can continue with the policy and expect the benefits promised by the insurer. If anything unfortunate happens to the policyholder within the grace period, the entire benefits can be claimed by the nominees. To put things honestly, the majority of the policyholders pay their premiums in the grace period than the regular period time.

What if I stop paying LIC premium after 3 years?

LIC is a government insurance company and more than half of the policy buyers choose this company. LIC is a little more flexible than its competitors in the market. If the policyholders are not satisfied with the features or services of LIC, they can surrender their policy after 3 years of buying it. However, in the 3 years, they have to consistently pay the premiums. Once they surrender the policy, the company will provide a certain amount of money to the policyholders. This amount is called the surrender value. However, opting for the surrender option is not much suitable for the policyholders as the amount they will receive from the company is not a lot as compared to what they would receive upon the maturity of the policy.

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Nevertheless, it is always prudent to go through all the features as well as the terms and conditions of the insurance policy you are buying. Also, you must discuss the consequences of discontinuation of premiums with your insurer while buying an insurance policy.


  1. I have discontinued ULIP policy after paying premium of Rs.50,000/- before 10 years.Can i get some refund of the same ?

    • It will depend on the policy type. In ULIP the amount is put in a discontinuation fund which earns a nominal interest rate and the same is paid to the customer after 5 years.

  2. Excellent topic that would aid me in my upcoming interview for the position of Sales Associate with an insurance company.

  3. I have money back plan of LIC BIMA GOLD. I have paid premium for 10 years and my policy is still enforce. I feel I’m not getting value for my money with this plan. what should I do? Should I stop making payments?

    • Dear Kanani,

      Thank you for reaching out to us. You can opt for the below options:

      1. Surrender the policy and take the value
      2. Opt for reduced Sum Assured where the SA will reduce in proportion to the premium paid and you can get the same at Maturity

      Thank you!

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