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etter SAFE than
SORRY
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Policyholders must make sure that they pay their premiums on time or else they may
have to face the wrath of the insurance companies
Sanjeev Patel, software professional and the only
working member of his family comprising two
kids and his wife had taken a traditional life
insurance policy for the security of his family,
as they are all dependent on him.
This policy is seven-years-old and Patel ensured that
each of the premium payments were made in a timely
manner. One day on the way back from work, in a very
tragic incident while crossing the road, he met with an
accident and lost his life. Fortunately for his family who
were entirely dependent on his income, the sum assured
on his policy helped them overcome the financial loss.
If it were not for the timely payment of premiums by
Patel, his policy would have lapsed, causing immense
financial strain to his family as the insurance company
would not have been liable to make any payments to the
family and they would have found themselves in a
situation of financial strain.
Note that insurance companies honour the commitments
if and only if the policy is active. Hence, in a traditional
life insurance policy if you have paid the premium for
three years and missed the premium for the fourth year,
the policy becomes inactive. Even though we know its
importance - security to family members, insurance
companies indicate that many policies lapse.
It could be due to various reasons. But carelessness tops
the list. In order to ensure that the policyholder remembers
to pay the premium, insurance companies send a
reminder for premium payment wherein they also
mention the grace period within which the premium
should be paid.
Beyond Market 04th Feb ’11
For monthly premium payments, the grace period is 15
days and for quarterly and annual payments it is 30 days.
If you fail to pay the premium even within the grace
period, the insurer sends a communiqué to you announcing
that the policy has lapsed.
In September ’10, IRDA came out with a new set of
regulations for ULIPs and health insurance products.
Traditional policies already follow a certain set of guidelines
outlined by the IRDA.
TRADITIONAL POLICIES
Do You Need To Take A New Policy If Your Policy
Has Lapsed?
Policy revival is possible but there are certain rules and
regulations governing the same. Revival reinstates the
benefits to the beneficiaries. According to the insurance
regulator IRDA, if a policy has been in force for at least
three years, the insured has the chance to revive it for a
period of up to two years.
��� Within The First Six Months Of Lapsation: If the
policy is revived within the six months of lapsation, then
the process involves just paying off the premium which
was overdue along with the interest and your policy will
be revived.
�� � � After The First Six Months of Lapsation: If the
policy is revived after six months of lapsation, you need
to pay the interest, outstanding premium amount and
penalty. This will differ from policy to policy.
If the policy was inactive for at least three years, the
death benefit ceases and the surrender charge may be as
high as 100%, resulting in the family getting no money.
It’s simplified...