Lapsed Policy: What to Do?
Written on Friday, October 30, 2015
By Narender Anand, Sr. VP & Product Head - GI, Bajaj Capital Ltd.
A life insurance policy lapses when the due premium has not been paid even within the grace period. A lapsed policy means that the benefit of insurance will not be available to protect the financial interest of the dependents in the event of the death of the insured. A lapsed cover can be revived by the policyholder during the period allowed by insurer before its maturity. The procedure for revival depends on the type of policy and the duration of its lapse.
Reinstatement: The documentation requirements for revival or reinstatement of a policy depend on the time elapsed between the date of lapsation and the date when the request for revival has been made by the policyholder.
Premium payment: In order to revive a lapsed policy, the unpaid premium, along with interest on the delayed premium at a rate specified by the insurer, has to be paid. The company may also impose a penalty.
Processing: A statement of health or certificate of insurability may also have to be given to the insurance company. It needs to be filled in, signed and supported by identity and address proof documents.
Things to note
-Revival is a fresh contract between the insurance company and the insured, and the former can impose fresh terms and conditions at this time.
-Insurance companies can provide continued cover for a lapsed policy at a lower amount and to the extent of the paid-up value of the policy.
-If the policy is not revived within the prescribed period, its surrender value is paid to the insured.
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