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Revival of Lapsed Life Insurance Policy

A life insurance policy provides your family with financial protection and offers a chance to grow your wealth in exchange for regularly paid premiums. However, if you fail to pay the premiums by the end of the grace period, the policy will lapse, which means you are no longer covered under the policy. Fortunately, you can revive your lapsed life insurance policy to continue the coverage and benefits at the previous premiums. Let us see how lapse and revival of insurance policy works. 

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What happens when Life Insurance Lapses?

In life insurance policy lapse means the policyholder was unable to pay the premiums at the payment due date and missed premium payment even during the grace period. If the premium remains unpaid at the end of the grace period, the policy will lapse, and the insurer will no longer cover and provide benefits to the policyholder. This means that the beneficiaries will not receive payment in case of your sudden death. However, most insurance companies in India provide a revival period during which the policyholder can request for the reinstatement of lapsed life insurance policy. 

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What is Revival of Life Insurance Policy?

Revival of life insurance policy refers to the renewal of a lapsed policy’s coverage. It is important to note that the process for the revival of life insurance policy will vary across policies and companies. Usually, insurers ask for a few documents like a health certificate, late fee penalty, interest applicable, and the outstanding premium amount for the successful reinstatement of lapsed life insurance policy.

What is Revival Period in Insurance?

The revival period in insurance refers to the period provided by the insurer during which the policyholder’s lapsed life insurance policy can be reinstated. The revival period in life insurance begins from the date of the first unpaid premium. The reinstatement of lapsed life insurance policy can easily be done during this period as most insurers provide a revival period of 3 to 5 years. 

How to Revive Lapsed Life Insurance Policy?

The primary reason behind buying a life insurance cover is to provide financial support to your family when you are not present. If you want to revive lapsed life insurance policy there are certain points which you need to consider:

  • Understanding reinstatement: Reinstatement of lapsed life insurance policy or the documents required for revival will depend on the time between the date of lapse and the date on which you request the revival.

  • Paying the right premium: For the revival of lapsed policy, you need to pay the unpaid premium along with the interest rate which is specified by the insurer. In some cases, you may also have to pay a penalty.

  • Processing of the policy: In most cases, a certificate of insurability or a health certificate needs to be given to the insurance company. This statement needs to be supported by address proof documents.

  • Fresh terms and conditions can be imposed: As policy revival is a fresh contract between you and the insured company, the insurer may impose new terms and conditions.

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What are the Benefits of Reinstatement of Lapsed Life Insurance Policy?

Here is how reinstatement of lapsed life insurance policy can benefit you:

  • Family’s Protection: The revival of life insurance can ensure your family’s financial protection in the event of your untimely demise during the policy term. Thus, after policy revival, your family will be eligible to receive the death benefit in case of the policyholder’s untimely death during the policy term.

  • Continued Coverage: The revival of life insurance policy can restart the coverage you had before the policy lapse. This means, that your critical illness, terminal illness, accidental disability cover, and other rider benefits will also be renewed. Therefore, in case of an eventuality, you will be financially secure.

  • Flexibility: Sometimes, the policy lapse is not planned but due to circumstantial financial strains. The policy revival feature can help policyholders who genuinely want to continue their coverage at the same premium for the entire policy term.

  • Timely Payments: The entire process of lapse and revival of insurance policy can help policyholders understand the importance of making timely payments. After the policy revival, the policyholder can avoid future lapse of life insurance using the following ways.

How to Avoid Policy Lapse in Life Insurance?

Here is how you can avoid the lapse and revival of insurance policy:

  • Opt for an ECS or an Electronic Clearing Service: Here you can give a standing order to the bank to deduct a particular amount towards the life insurance policy.

  • Pay through ATMs: Certain insurance companies have tie-ups with banks where the banks provide you the option to pay the premiums through their ATMs.

  • Choose auto-pay service through your ATM card: If you opt for this, your premiums will be pad automatically through your credit card, and this will reflect in the billing cycle of your card.

  • Weigh your resources: Before you opt for a policy ensure that it does not burn a hole in your pocket.

Wrapping it Up!

In case your life insurance policy lapses, you can still apply for the reinstatement of lapsed life insurance policy during the revival period. You can contact the insurer for a revival of the lapsed policy and revive the benefits and coverage of the policy for the remaining policy term. It is advised that you initiate an open discussion with the insurance agent to get a better understanding of the lapse and revival of insurance policy.

FAQ's

  • How do I revive my life insurance policy?

    Ans: You can contact your insurer and apply for revival of life insurance policy and submit the outstanding premiums, applicable interest, penalty fees, health certificates, and other such documents.
  • What is the penalty for revival of lapsed policy?

    Ans: The penalty for the revival of lapsed policy is different for different insurers. Your insurer may charge you a penalty fee on the unpaid premium depending on the tenure of unpaid premiums. You need to check the policy documents and the T&Cs of your policy to get a better understanding of the applicable penalty on your policy.
  • Can a policy be revived?

    Ans: You can revive your life insurance policy within the revival period to continue your plan’s coverage. The life insurance policy will go into lapse if the policyholder fails to pay the premium during the grace period.
  • Can you recover a lapsed life insurance policy?

    Ans: Yes, you can revive your lapsed life insurance policy within 3 to 5 years of the revival period. The applicable revival period may be different for different plans. Thus, you should check with your insurer about how and when you can revive your lapsed life insurance policy.

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