Give your lapsed life cover a new lease of life

3 MinsOct 05, 2020

The last six months have been tough on everyone. A lot of people are cutting down on expenses in a bid to conserve cash. This is a perfectly understandable strategy if you have had to take a pay cut or lost your job. However, if you haven't paid your life insurance premium and let the policy lapse, you have made a mistake. But don't worry, all is not lost.

insurance policy

Do I have to let go of my life insurance policy if I haven’t paid a premium?

Many of you may be under the impression that just because you haven't paid your annual premium, your insurance policy is 'cancelled'. This is a common misconception. But the fact is that your insurance policy is not cancelled; it has just gone into a 'pause' mode. Almost all life insurance companies give their customers 2-5 years to renew their plans from the date of your first unpaid premium. Check your policy details, and you will be able to find the exact duration for which you have a grace period.

So does this mean my policy is still active?

No, it doesn’t. As mentioned, the policy is on hold. If God forbid, something were to happen to you after the policy lapses, then your family will not receive any death benefits from it.

[Also Read: How to start saving for your retirement]

If I can’t afford my premium payment now, should I wait since I have time?

No, you shouldn’t. If the situation is dire for you, prioritize your life insurance payments. These are as important as your EMIs and loan repayments. By paying the premium you are ensuring that your family will be provided for if something were to happen to you.

What is the duration during which I can revive my policy?

The rules vary depending on the kind of policy you have. For Whole Life policies and Unit Linked Insurance Policies (ULIPs), typically insurance companies allow for two years for revival. If it is a term insurance policy, you might get between 3-6 months to revive it with a medical certificate/health declaration form. Some insurance companies may ask you to go for a medical test before renewing your Whole Life policy or ULIP.

What happens if I don’t revive my policy within two years?

This is not a very smart thing to consider. If you don't revive your policy within the specified period, you only get the surrender amount, which is a fraction of the original benefits. Hence, don't let your policy relapse.

Does it make sense to buy a new policy if the old one lapses?

No, it doesn't. Insurance is an essential component of financial planning. The recent Coronavirus pandemic has highlighted the importance of insurance. Besides life insurance premiums are calculated on age. So, if you have bought a policy earlier, when you were younger, – the premium would have been lower. For a new policy premium would be calculated based on your current age, and that is bound to be higher. Use Axis Bank's life insurance calculator to know your EMIs.

What are the charges I will have to pay?

The only charge you will have to bear is a penalty or a 'renewal' fee along with the missed premium. There are quite a few insurance providers who are running revival campaigns for clients who have missed premiums. They might even waive these charges. But it is not advisable to wait for such campaigns. Ideally, you should review your lapsed policy at the earliest to be able to enjoy its benefits.

Axis Bank has tie-ups with multiple life insurance companies – Max Life, Life Insurance Corporation of India and Bajaj Allianz Life. If your insurance policy is from any of these companies, go to our online life insurance section and find out how to revive it.

Disclaimer: The Source, a Mumbai-based content creation, and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.