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Even though a life insurance Policy gets lapsed due to non-payment of the premium, it can still be revived according to rules and regulation of the IRDA and major life insurance providers. A life insurance policy goes into a lapsation period once the Policyholder fails to pay the Premium even after the grace period. However, there are some conditions which must be met to reinstate a lapsed policy, such as:
Make sure that the policy is revived during the period when the revival is possible. If the policy is revived beyond this period, the insurance contract is terminated and thus the policy gets cancelled.
Unpaid premiums and interest accrued in the lapsation period must be paid.
Health review may have to be done again.
Some plans get a further six-month period where policy can be reinstated as it is, provided premiums and interests are paid, penalty is furnished, and written documents are provided. There are ULIPs where policyholders are given even shorter period – say 45 days -- to get life insurance to its original form. Many insurance providers increase the existing premium rate for the policy but keep the other benefits same.
In many cases, the policy is revived no doubt but vested bonuses, rider benefits, and Loyalty Additions are summarily withdrawn. If the policy goes into lapsation mode at a later stage, a paid up value is provided and policy is automatically revived by the company. However, the paid up value has a reduced sum assured, lesser benefits, and perhaps no extra privileges.
In other words, reviving a plan can cost you some benefits which you would earlier get in a non-discontinued plan. Nevertheless, many policyholders still revive plans as they are probably the best life insurance policies. If your life insurance has lapsed and you want to revive it, make sure you comply with all the conditions laid down by the insurance provider. Take a look at the steps you need to take to revive a life insurance policy.
A policy must be revived in order to Claim benefits. The lapsation time is very important as it is one of the factors in determining whether a policy would be reinstated or terminated. An Endowment Plan can be revived if the process is initiated within 5 years from the last due date of the unpaid premium. Make sure that the policy is within its policy Term period.
Submit a letter of request to the insurance provider on revival of the policy.
Download the form for revival, fill in the required data, and submit the form to the online life insurance customer service cell.
The insurance service provider will calculate premium and interest. It will intimate the same to the policyholder.Penalty charges or review medical tests and other ancillary work would have to be done to revive the policy.
Revival amount acceptable to the insurance service provider is sent across.
Apart from unpaid premiums the defaulters need to pay interest at the rate of 12-to18 percent of the premium amount. Penalty is also levied depending on the insurer’s norms, lapsation time, and policy type. The profitable option would be therefore, to revive the life insurance policy as quickly as possible to avoid heavy penalties and loss of benefits.