A Life Insurance Policy lapses when the due premium has been missed out to be paid, even within the grace period. Therefore, the benefit gained out of insurance cannot be obtained for providing financial security to the dependents in the event of the demise of the insured. There are individuals who deliberately let their insurance policy lapse for some or the other reason. Some do it because they cannot afford the premium any longer, while some miss it since they’re travelling abroad, while a few have taken multiple insurance policies to initially save tax, but can no longer afford the premiums.
Considering all these facts, if you miss out any of the premiums for any reason, you miss out on the benefits that are attached to the policy and invariably, you expose yourself to the financial risks related to health or life emergencies.
There are mainly two ways in which an insurance policy could lapse. One is an obvious reason that you have missed paying your premiums for consecutive months and the other is withdrawal through the cash surrender value. This amount is taken up by the insurance company if you happen to terminate your policy voluntarily before the maturity period.
When is the right time to revive your policy?
The insurance company wants you to continue with the policy and therefore offer you with multiple options to revive it. Certain laws state that if your policy has been active for at least three years, you get a period of two years to revive it. There are some exceptional insurance companies that also offer a period of 5 years to revive your policy which is subjected to certain conditions.
How can you revive a lapsed insurance policy?
While there are many ways in which you could revive a policy, but the time frame plays an important role. In case of normal revival procedure, if you have missed paying your premium for the last six months, you can still pay with an applicable rate of interest and get your policy revived. Also, you need not be worried about the health check-up being done again.
However, in a scenario where you want to revive the policy after a very long period, the insurance company might ask you to undergo a health checkup all over again. This is to ensure and take into account your health condition which might certainly change during the time period. The fresh contract ensures that the suicide pact of one year continues in the new contract as well. Only after analyzing your current health and financial condition would the insurer decide on reviving your policy or declining it altogether.
Therefore, the revival option proves to be beneficial to the policy-holders since they can enjoy the continuation of the life coverage at much lower premiums; and can avail bonus during the period when the policy has lapsed. Consider the stated factors and keep your policy alive in every way and revive it if it gets lapsed.