A policy may lapse or expire for various kinds of reasons and you need to know the nitty gritties involved in the same. This is exactly what we will be covering in this blog, including lapse policy meaning, lapse period in insurance, what to do once a lapse of policy occurs, and more.
What is a Lapsed Life Insurance Policy?
A lapse of policy is essentially when an insurance plan is no longer viable or active. This means that all the coverage, benefits and claims associated with the plan are no longer accessible to you, the policyholder.
Essentially, the meaning of lapse in insurance is that the agreement between the insured and the insurer is no longer viable. This, of course, means that the insurer is no longer obligated to pay the death benefit upon the policyholder’s untimely demise unless you do something about the lapse.
Reasons for Policy Lapse
You haven’t paid your premium withinthe time period for payment of premium, including during the grace period that an insurer gives for the payment of missed premiums.
How to Prevent Your Life Insurance Policy from Lapsing
Avoiding a lapse of policy is a matter of discipline, first and foremost. So, just like most other things that take discipline, like working out or kicking a bad habit, you need to take the necessary steps:
- Set reminders or notifications to ensure that you can pay premium regularly, on time
- Make sure you keep an eye on policy dates and renew before or by the time the policy nears expiration
- Speak to your insurance representative and ask for SMS/email reminders so that you never miss out on premium payments or renewals
Of course, there’s also some simpler ways to avoid lapse of policy, including:
- Buying a single-premium life insurance plan that doesn’t require you to pay periodic premiums
- Opt-in for the auto-debit feature, whereby premiums are deducted from your bank account automatically when the premium becomes due.
Is It Possible to Reinstate a Lapsed Life Insurance Policy?
Well, yes! You can reinstate a lapsed life insurance policy in almost all cases as insurers do not want you to miss out on your financial security just because you missed out on some payments. But, this is just the simple and straightforward answer.
Firstly, when it comes to reinstatement, there’s a specific lapse period in insurance. This is the grace period that the insurer provides after non-payment of premiums. If the grace period hasn’t ended, you just need to resume regular premium payments to avoid policy lapse.
However, in case the grace period has ended, the process for reinstatement can vary. It largely depends on:
- The insurer you are working with
- Your payment history with them
- The type of policy you’ve opted for
- The time between policy lapse and reinstatement.
Depending on these factors, reinstatement can be as easy as just making a phone call or on the other hand, might also involve paying penalties.
Steps to Take if Your Life Insurance Policy Has Lapsed
Here are the steps involved in reinstating a lapsed life insurance policy:
- Give your insurer a ring and talk to them. Tell them you want to reinstate your lapsed policy. It’s best to do this as soon as you are notified of a lapse of policy.
- Depending on how long it has been since the lapse of policy, the process may vary. In case a lot of time has passed, some insurers may charge a penalty for reinstatement.
- The next step is to provide all the necessary information and documentation that the insurer will ask for so that the reinstatement can be commenced.
- Finally, it is crucial to commit to regular premium payments (and indicate the same to your insurer) once the reinstatement is done.
Conclusion
Life insurance policy can also expire and this is what is known as a lapse of policy. If this happens to you, firstly you need to check whether the grace period (AKA lapse period in insurance) has ended or not. If it hasn’t, then just continue paying your premiums and the policy won’t lapse. If it has ended, then factors like payment history, insurer terms and conditions, nature of policy, etc will define how smooth or complex the reinstatement process will be. At the end of the day, discipline in paying premiums or opting for a single premium policy/auto-debit option can help you avoid all these hassles.
Frequently Asked Questions
Q1. 1. What happens if I miss a premium payment for my life insurance policy?
Missing a single premium payment doesn’t have any major consequences. The problem arises if you ignore paying the missed premium for too long or continue to miss premium payments. This can result in a lapse of policy eventually.
Q2. Can I file a claim during the grace period?
Yes, you can still file a claim during the grace period, which is usually 30 days from the last missed premium payment. However, in such a case, the insurer mostly deducts the missed premium amount from the sum assured.
Q3. Are there any fees for late premium payments within the grace period?
No, there are no penalties for late premium payments as long as you make them within the grace period. This is why those 30-odd days are known as “grace” periods! Paying after the grace period, however, is a completely different matter and may include penalties.
Q4. Can I change my premium payment schedule to prevent future lapses?
Yes, you can! It’s best to choose a premium payment schedule that you can stick to. You can also opt for methods like auto-debit to ensure you do not miss out on any future payments.
Back
Share
1800-268-0890
