Learn from experts how to revive an insurance policy if it lapses
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| How to revive an insurance policy if it lapses |
Insurance plans are a better option to give financial security to your family. This is because it is an economical and safe way to get the sum assured to the family members when you are not there. The annual premium rates of these plans are very low. But have you ever wondered what can happen to the policy if you fail to pay the premium on time? Will this cause your policy to be discontinued? We are going to answer these questions of yours in this news.
When does an insurance policy lapse?
After purchasing any type of insurance policy, the premium is paid for it every year for a certain period. If due to any reason you are not able to pay it on time, then, at that point the strategy is ended. There could be no other choice to begin it. In such a situation, the option of buying a new policy remains. It is costlier than the old policy as it increases the age of the applicant.
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Expert Opinion
Financial planners believe that in case of lapse of the insurance policy, the policy can be revived by paying a premium along with a fixed interest. On the other hand, if you do not pay and it is a traditional policy, then it becomes a paid-up policy at the end of the lapse period. The Sum Assured is reduced in a paid-up policy. It depends on the premium paid by you. Also, the sum assured is available only on the maturity of the policy.
Know what to do in case the policy lapses
Revive the lapsed policy in this way
When you fail to pay the insurance premium, the policy is transferred to the grace period state. Under this, it becomes the responsibility of the insurance company to pay the sum assured to the beneficiary after the death of the policyholder. Generally, the insurer gives a grace period of 30 days for premiums for half-yearly and one-year terms and 15 days for monthly payments. However, this period might shift from one organization to another. During this grace period, the policyholder can reactivate his/her insurance policy by paying the premium. For information, let us tell you that the policy is considered to lapse after the grace period is over.
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What happens when the policy lapses
If the grace period given by the insurance company expires and no premium is paid to activate it, the policy will lapse. In such a situation, the recipient won't get the aggregate guaranteed after the demise of the policyholder.
Understand by example
If a person dies in an accident and misses the premium payment of the term plan. In such a situation, if the accident happened during the grace period, then the family members can file the claim and the insurance company will have to bear the sum assured. At the same time, if the accident happened after the lapse of the policy, then the insurance company will not pay any kind of sum assured to the family.
However, the lapsed policy is not useless at all. It can also be activated. For this, the policyholder has to go through the reinstatement process. Most companies offer the option to revive the lapsed policy. This process can prove to be a bit costly. This is because medical checkups or penalties may have to be paid in it.
The process of reviving a lapsed policy is called reinstatement. It can be availed only when the grace period is over. The reinstatement process of lapse policy differs from company to company. Also, it relies upon the time passed, product type, and insurance cost.
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