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Life Insurance Policy Lapses
Grace period is the window, after the premium due date, in which the premium can be paid before a policy lapses. Most insurers offer term plans that can be reinstated within a specific period. On payment of some charges, the policy can be continued and the original benefits restored. Insurance policies are active for as long as the insured continues to pay the agreed premium. What happens in case the insured misses a payment due to any reason? What can be done to recover the situation? Read more to find out.
1 Crore Term Insurance@Rs.21/day***
To delay is to regret
You may not always be around to take care of your family. And that’s when a term plan ensures your family is well protected.
:1800-266-9777
What Happens When Your Life Insurance Policy Lapses
Grace Comes Before Lapse
Insurance companies understand that the insured might not always be able to pay the premium every time before the due date. Almost every insurance policy offers a grace period.
It is important to note here that the policy is still in force during the grace period, and if anything happens to the insured, the nominee would still be eligible for the benefits.
A Lapsed Policy
If the insured does not pay the premium amount even during the grace period, the life insurance policy lapses. In this state, the insured will no longer enjoy coverage from the policy, and will also not be eligible for any death benefit. But there is a way out.
Revival/ Reinstatement of Lapsed Policy
Most insurance policies offer a revival feature. With this, the insured can ‘revive’ his/her lapsed policy, if he/she comes to the decision of renewing it.
There is a process that needs to be followed for reinstatement of the life insurance plan. Firstly, the insured will have to submit proof of continued insurability, these documents vary from insurer to insurer and also depend on the time elapsed. Secondly, the insured will have to pay all the due premiums along with the revival charges prescribed at the time of payment.
Lastly, if the insurance company sees fit, the insured might have to undergo a medical examination. Post the successful accomplishment of these conditions, the insurance policy will come into force with all its original benefits.
New vs Revived Policy
The premiums for term plans increase with age. For example, if Sumeet (25) buys a term insurance plan, pays an annual premium of ₹ 6,000 for two years and lets the policy lapse, he would have paid ₹ 12,000 as premium.
Now, assume that he wants to renew his policy after two years of the last premium paid. The insurer will charge him a renewal fee, late fee plus interest charges for the premiums due for the last two years. Let’s assume all these add up to a total of ₹ 18,000.
Alternatively, if Sumeet (now 29 years old) looks for a new insurance policy from another insurer, it might cost ₹ 8,000 annually. In this, he would be facing a loss of the premiums he has already paid for the old policy. Moreover, he will have to pay ₹ 2,000 more every year than what he would otherwise pay in the old policy.
Remember, if the old policy is reinstated, the premium usually remains unchanged and that can make a difference in the long term. In the end, the decision to revive or buy a new policy varies on a case-to-case basis.
But, the smart thing to do is to pay the premiums regularly. It is easy because there are several modes (online and offline) of premium payments. Setting up standing instructions (ECS) with your bank is the most convenient method to ensure that your premiums are paid on time. Opting for an annual payment mode also helps reduce the hassle of remembering due dates.
HDFC Life Insurance offers term plans that are affordable and come with the reinstatement feature. Read more on our website and get a quick quote to stay protected.
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Francis Rodrigues
Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.
Written By:
Vishal Subharwal
Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.
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Here's all you should know about life insurance.
We help you to make informed insurance decisions for a life time.
HDFC Life
Reviewed by Life Insurance Experts
HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER
We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.
^ Available under Life & Life Plus plan options
#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved
##Individual claim settlement ratio by number of policies as per audited annual statistics for FY 23-24
***Online Premium for Life Option for HDFC Life Click 2 Protect Super (UIN: 101N145V07), Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Monthly Premium of 622/30=20.7).
**7% online discount available on 1st year premium only
@As per integrated annual report FY23-24, available on www.hdfclife.com. As of May 2024
~Tax benefits of ₹ 54,600 (₹ 46,800 u/s 80C & ₹ 7,800 u/s 80D) is calculated at highest tax slab rate of 30% on life insurance premium u/s 80C of ₹ 1,50,000 and health premium (Critical illness rider) u/s 80D of ₹ 25,000. Tax benefits are subject to conditions under section 80C, 80D, 10(10D) as per Income Tax Act, 1961. Please consult your tax advisor for more information.
ARN: ED/08/22/28485
