How to revive your lapsed life insurance policy

Life insurance companies use every method of communication at their disposal to remind policyholders to make timely premium payment. From emails, SMSs, physical notices, phone calls by contact centre employees, agents etc various methods are employed to collect premium within the due date or the grace period. One has to really work hard to miss these alerts and intimations. Yet, many policyholders do not pay on time resulting in policy lapsation. So, if you are such a policyholder, how do you revive your lapsed policy? Read on to find out.

When does a policy lapse?

The date on which the policy premium is to be paid is called the due date. If you are unable to pay by the due date, do not worry. Companies usually provide a grace period within which you can pay. The grace period is generally 30 days for Annual, Semi-annual and Quarterly payment modes and 15 days for Monthly mode. In case you do not pay within the grace period, the policy lapses.

Why do lapsations occur?

The most common reasons include forgetting to pay, not getting premium intimations due to changes in address/contact details which are not updated with the company, shortage of funds, unsatisfactory services, unsuitable policy, mis-selling etc.

What happens when your policy is lapsed?

Life insurance coverage stops as soon as the policy lapses. The insurance company is not liable to pay the various benefits applicable under the policy till the policy is revived. Here, you may note that for policies with premium term less than 10 years, if after at least 2 full years’ premiums have been paid and for policies with premium payment term more than 10 years, if after at least 3 full years’ premiums have been paid, if subsequent premiums are not paid then the policy will not be completely void but subsist as a paid up policy

When can you revive your lapsed policy?

A lapsed policy can be revived anytime within 2 to 5 years from the date of lapsation (this period may vary among companies) or before the maturity date/policy end date whichever is earlier.

How to reinstate a lapsed policy?

The ease of reviving a lapsed policy usually depends on the time elapsed from lapsation. Most insurance companies have similar guidelines with some variations.

Within 180 days of lapsation – The policyholder can login to the company website, find out the unpaid dues and make the payment online and the company will revive the policy with no questions asked. Alternatively, one can visit a branch office, pay the dues and revive the policy. A penalty or late fees may be charged.

For term and traditional policies, alongwith unpaid premium an interest is also charged.

After 180 days of lapsation – Alongwith unpaid premiums, late fees and interest, a certificate of insurability/declaration of health needs to be submitted. Some companies even require identity/address proofs. A certificate of insurability (COI) is a questionnaire which has questions akin to the application form on personal and medical history. For high value policies or policies issued at inception by conducting medical tests, such medical tests may be conducted once again while applying for revival. After reviewing the COI, the insurance company may call for other documents, medical tests etc. Here, it is important to note that revival is considered as a fresh contract and the insurance company may rate up the policy, increase premium or may even reject the revival request!

LIC provides various schemes for revival like special revival scheme, installment revival scheme, loan cum revival scheme and survival benefit cum revival scheme. Most insurance companies have dedicated teams to ensure lapsed policies are brought back into the fold. Reinstatement campaigns are run to revive lapsed policies. Policies forming part of the campaigns may be provided favorable terms for revival such as waivers in interest, late fees (even medical tests on a case to case basis) etc.

Conclusion:

Generally, insurance premium doesn’t rank high up in our list of priorities and hence many people forget to pay the premium. Insurance companies provide many easy premium payment options. You can opt for standing instructions/ECS/direct debit to ensure that your policy coverage is uninterrupted. Also, buying a plan which is suited to your specific needs and where the premium is in line with your income provides motivation to pay and keep active rather than those policies which are taken to indulge agent friends/relatives.