What is the Revival Period In Term Insurance?

Coverage terminates if the policy is not revived within this period, and the policyholder forfeits any death benefits and premium refunds.

Let’s understand the concept of revival in term insurance with an example:

Suppose Priya purchased a ₹50 lakh term insurance plan with a 20-year policy term. After paying premiums for 5 years, she faced some financial challenges and missed her premium payment. Unfortunately, this caused her policy to lapse. However, Priya learned about the revival period, which is 2 years for her policy. During this time, she could reinstate her coverage by paying the missed premiums and a small interest fee. Priya gathered the money and paid the outstanding amount within the revival period. As a result, her policy was restored. 

In this article, we’ll discuss the revival of term insurance, its types, and how can one revive their term plan.

How Does Revival in Term Insurance Work?

Revival in term insurance is reinstating a lapsed policy to restore its benefits after a policyholder fails to pay premiums. Here’s how the process works:

• Lapse of Policy: A term insurance policy lapses when the policyholder misses premium payments even after the grace period, typically 15 to 30 days. The grace period allows for late payments without losing coverage.

• Revival Period: After a policy lapse, there is usually a specified revival period—often ranging from 6 months to 5 years—during which the policyholder can reinstate it.

• Requirements for Revival:

  • Outstanding Payments: The policyholder must pay all overdue premiums, along with any applicable interest or penalties.

  • Medical Assessment: Depending on how long the policy has been lapsed, the insurer may require a medical examination to assess the policyholder's current health status.

• Application Process: The policyholder needs to contact their insurer to request revival. This involves completing the necessary forms and providing any required documentation, such as identification and medical records.

• Confirmation of Revival: The insurance company will review the revival request, considering the policyholder's health and payment history. The policy's revival will be confirmed once the insurer processes the payment and provides the necessary documentation. The policyholder will then regain the benefits and coverage under the original terms.

Benefits of Reinstatement During the Revival Period

• Restoration of Coverage: Reviving a lapsed policy restores the life insurance coverage, ensuring financial protection for your beneficiaries in case of an unforeseen event.

• No New Underwriting Required: Reviving the policy typically does not require going through the underwriting process again, which can save time and potentially avoid higher premiums due to age or health changes.

• Protection Against Loss of Benefits: Reinstatement allows you to retain the policy's original benefits, including the sum assured and any riders, which may not be available with a new policy.

• Cost-Effective Option: Reviving a policy is often more economical than purchasing a new one, as you avoid starting from scratch with potentially higher premiums due to age or health conditions.

• Peace of Mind: Knowing that your coverage is reinstated provides peace of mind, allowing you to focus on your financial planning without worrying about leaving your loved ones unprotected.

• Tax Benefits: Revived policies continue to offer tax benefits under Section 80C of the Income Tax Act for the premiums paid, helping you save on taxes.

• Flexibility: The revival process often allows for flexibility in payment terms, giving you options to manage outstanding dues in a way that fits your financial situation.

How To Revive a Lapsed Term Insurance Policy?

Reviving a lapsed term insurance policy is a simple process. Follow the below steps to review your lapsed policy:

Step 1: Check your policy documents for revival terms and conditions. This includes understanding the grace period, penalties, and any additional requirements for revival.

Step 2: Contact your insurance company or agent. They can provide specific guidance on the revival process and inform you of any outstanding premiums or documents needed.

Step 3: Clear any overdue premiums as specified by the insurer. This may include late fees depending on how long the policy has lapsed.

Step 4: Fill out any necessary forms for revival. This may involve a revival application and possibly a medical examination, especially if time has passed since the lapse.

Step 5: Once you’ve submitted the payment and documentation, get written confirmation from your insurer that your policy is revived. Review the policy terms again to ensure everything is in order.

How Can I Avoid the Lapse of Term Insurance Policy?

To avoid the lapse of your term insurance policy, consider the following strategies:

• Set Up Automatic Payments: Enroll in automatic premium payments through your bank account to ensure timely payments without remembering each due date.

• Choose a Convenient Payment Frequency: To make it easier to manage, select a payment frequency that fits your financial situation—monthly, quarterly, or annually.

• Maintain an Emergency Fund: Keep a separate savings fund for insurance premiums to cover any unexpected financial challenges.

• Stay Informed: Review your policy details and payment due dates regularly. Set reminders a few days before the due date to avoid missing payments.

• Utilize the Grace Period: If you miss a payment, take advantage of the grace period (usually 15 to 30 days) to make the payment without losing coverage.

Wrapping It Up

Reviving a lapsed term insurance policy is easy if you act within the revival period. You can regain your coverage and protect your loved ones by understanding the terms, maintaining open communication with your insurer, and promptly addressing any outstanding payments. Keeping track of your premium due dates and setting up automatic payments can help you avoid lapses in the future, ensuring you always have the financial security that term insurance provides.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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