Mr. Bhuvan has purchased an LIC policy and pays his premiums monthly to keep it active. But, due to certain unfavorable circumstances he was unable to pay the premium on the due date. Therefore, he was given a grace period of 15 days to pay the premium, and failing to still pay would end up in lapsation of his policy. After Bhuvan failed to pay the premium during the grace period, his policy lapsed. He was then given 5 years time to revive his policy and if he doesn’t pay the amount within the given timeframe, he will face absolute cancellation of his policy.Read more
Let’s understand in this article how you can revive your LIC policy and some important parameters to keep in mind when you revive your LIC policy.
You can revive your LIC policy by paying the due premiums and the interests that are added to it. According to LIC, if you do not pay the policy premiums within the grace period, your policy will lapse.
The revival of a life insurance policy is required when the life assured/policyholder fails to pay the premium within the grace period and the coverage of the policy lapses. The inclusion of revival of policy is a must to have as it provides an option to the insured person to renew the policy and continue with the coverage of the plan. The renewal of the lapsed policy can be done anytime within 5 years from the date of unpaid premium.
The revival of the LIC policy can be done under the following 5 different schemes: -
Under this revival policy, the insurance holder can revive his/her lapsed life insurance policy by paying all the unpaid premiums including the interests in one go. However, the policyholder can be asked for the declaration of good health and medical report under form no-680. Moreover, the policy must be revived in the first 6 months of the due date of the first unpaid premium, and the payment will be inclusive of late payment charges as well as interest rate (which is determined by the start date of the policy).
Under this scheme the date of commencement of the insurance holder can be shifted and the insured person can pay only one due premium according to his/her age during revival. A special revival scheme can be availed if the insured person is unable to pay the premium in a lump sum. Under the special revival scheme, the insured can be asked for a medical report and declaration of good health under form no-680. There are certain conditions that need to be fulfilled if the insured wants to revive the policy under a special revival scheme. These conditions are as follows.
A special revival scheme can be used only in the entire tenure of the policy.
The insured person can do special revival only within 3 years of the policy lapse, and can be availed once throughout the whole policy term.
Any surrender value should not be acquired under the policy. Thus, the special revival option can be implemented within the 3 years of the commencement date of the policy.
*Note: In case it is a Money Back plan, the stamp fees and insurance preparation fees will have to be paid by the customer.
In case if the insured person fails to pay the due premium in a lump sum and special revival, he/she can use an installment revival scheme to revive their policy. Under the installment revival scheme, the policy can be revived by paying the amount in the following ways.
In yearly premium mode, the policyholder needs to pay half of the yearly premium.
The policyholder must have at least paid premiums for over a year.
In the half-yearly mode of premium payment, the policyholder needs to pay one-half of the yearly premium.
In the quarterly premium payment mode, 2 quarterly payments are required to be paid by the insured person.
The insurance holder can pay a regular 6 monthly premium under the monthly mode of premium payment.
*Note: Policies that are issued under Salary Savings Plan will not be eligible for the Installment Revival Scheme.
Survival benefit schemes can be used to revive the money-back policies. If the survival benefit due date comes earlier than the renewal date, then the insured person can avail survival benefit to revive the policy. However, the policyholder will have to pay the excess amount in case the revival amount is more than the survival benefit. In the same way, if the revival amount is less than the survival benefit then the rest of the remaining amount is paid back to the insured person.
The insured person can also revive the policy by taking the policy loan if, on the date of revival, the policy acquires a surrender value. The insured person will have to pay the additional amount in case there is any deficit in the revival amount. If the loan amount is more than the revival amount, then the extra amount will be paid to the insured person.
Medical basis revival is possible if the insurance policy can’t be revived under normal conditions or non-medical basis. And under non-medical basis, the amount that is required to be revived must not exceed the limit authorized for non-medical assurance.
Suppose if the policyholder who owns a life insurance policy suffers from any critical illness just before the expiry of the policy. In cases like this, if the policy of the insured person is not revived then he/she may face a lot of difficulties to buy any new insurance policy. Moreover, they won’t be able to avail the benefits of the pre-existing policy as the benefits of the policy will lapse.
Reviving a lapsed Life Insurance Corporation (LIC) policy is also essential for the below mentioned reasons:
The primary reason for reviving a lapsed LIC policy is to continue life coverage. If the policyholder dies during the policy lapse period, the nominee will not receive the sum assured, and the premiums paid will be accounted as canceled. Hence, reviving the policy ensures that the life cover continues, and the nominee will receive the death benefit in case of the policyholder's untimely demise.
Life insurance policies offer several tax benefits, such as tax deductions on premiums paid under Section 80 C and 10(10D) of ITA. However, these benefits are only applicable if the policy is active. If the policy has lapsed, the tax benefits will also be lost. Hence, reviving the policy ensures that the policyholder can continue to avail of the tax benefits.
Reviving a lapsed LIC policy is often more cost-effective than purchasing a new policy. The policyholder may have to pay a penalty and interest on the unpaid premiums, but it is still likely to be cheaper than buying a new policy, which may have higher premiums due to age and health factors.
The life insurance policy offered by LIC can be easily renewed by taking the below factors into considerations:
The insurer can ask for the medical/health reports based on the sum assured amount of the plan and the insured’s age. If the insured has a medical history or is undergoing treatment for a very long time, then he/she is required to submit the health reports.
A policy can only be revived if it has not exceeded a specific time duration from the lapse date of the policy. LIC determines the tenure as it depends on the type of policy.
LIC has introduced various campaigns with discounts and fee exemptions on the penalties for reviving the policy. It depends on the T&Cs issued by the insurance company.
The insurer can charge some fines or penalties for reviving the policy. It depends on the sum assured amount and the time after the policy has lapsed.
Life Assured can revive the policy with the insurance company directly by visiting the LIC’s official website or nearest branch. Once the policy is revived, the benefits offered by the policies are also reinstated. You can also contact LIC’s customer care to find more about its revival process.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ