What will happen when you stop the premiums payment of your life insurance policy
Cash-out Policy | Non-Forfeiture Options | Reinstating Policy | Insurability Proof | Medical Check-up | Application for Reinstatement
The moment you purchase the life insurance policy, you and your family start getting coverage benefit for premiums you pay on regular basis every year with any interruption until the policy term ends. But, sometimes due to increasing responsibilities, lack of enough funds, busy schedules, increasing responsibilities, and sudden increase of expenses are some of the very common reasons for the policyholder for missing premium payment.
The life insurance policy categories in which the non-payment of the premium is divided into.
- In the case of term insurance of the term insurance policy will be terminated and you will fail to get all the insurance benefits and the premiums paid.
- In the case of ULIP (Unit Linked Insurance Plan) if you miss the premium payment in the first 5 years which is called the lock-in period of the policy, your policy will be terminated and the premiums paid by you will be moved into a discontinuance fund area which will only be refunded after the lock-in period of the policy. Please note the lock in period of the ULIP of different insurance companies are different so please make sure to get the information about the same while purchasing the policy.
Maximum Deadline For the life insurance policy Premium payment
According to IRDAI (Insurance Regulatory and Development Authority of India) guidelines, there is a grace period of 30 days from the last date of premium payment which is applicable for all the insurance company. The policy will be active in the grace period also. If an unforeseen event happened to the policyholder, in that case the beneficiary can claim insurance benefits during this grace period also.
What happens If You are not capable of making Payment of the Premium for your life insurance policy
Following are the few things you can do in case if you are not able to make the payment the premium for your life insurance policy
3.1 You can Cash-out the Policy –
Carefully read the terms and conditions of your policy and contact with your insurance company asking whether you can cash out the premiums you have paid already. If the insurance company permits you to cash out the paid premiums, once you cash out you will no longer get the benefits of that insurance policy, the cash out amount will be taxable depending on the amount you cashed out.
3.2 Look for Non-Forfeiture Options –
Some insurance companies are offering the feature of option to reduced paid-up which means if you are unable to continue paying the premium for the life insurance policy. Non-forfeiture option will allow you to continue the policy with the reduced benefits depending on how much premium you have paid. which means in other words your policy is not terminated due to non-payment of the premium rather getting the benefit of coverage according to amount already paid.
3.3 Reinstating the Policy –
life insurance policy can be reinstated depending on the insurance company and their terms and conditions. All most all insurance companies allow their customers to reinstate lapsed policies on the payment of penalty, late fees and renewal fees, it depends on how late you are renewing the insurance policy.
How to Reinstate Your Life Insurance Policy?
A penalty or renewal fee will charge by the insurance company to reinstate your lapsed policy. Following are the requirements for the reinstatement of your insurance policy;
First step – Application for Reinstatement
An application reinstatement is needed to be submitted to the insurance company. Please note that the application must be submitted within the renewal period, that is normally 2-3 years after the grace period.
Second step – Insurability Proof
Please Check with your insurance agent for more details about an insurability proof. Which is must because the insurance company will ask for your insurability proof for reinstating the policy and continuing the policy.
Third step – Medical Check-up
The insurance company will also ask you to go for a medical check-up to confirm your current health status and to check if there is been any changes in the heath since the original application.
Conclusion
Please note that reinstating a policy is always better than buying the new policy because when you buy the new policy, you will lose all the premiums paid by you will date. And even more the premiums for the new policy will be higher than what you paid for your previous policy. Even insurance companies encourage policy holder to reinstate the old lapsed policies.
In order to make the premium payment on date it is very important to set reminders for the same. If at all you are unable to pay the premium, please inform your insurance agent to find ways to continue your policy and get the maximum benefit of your insurance policy.
FAQ
Question – what is Maximum Deadline For the life insurance policy Premium payment?
Answer – According to IRDAI (Insurance Regulatory and Development Authority of India) guidelines, there is a grace period of 30 days from the last date of premium payment
Question – What happens If You are not capable of making Payment of the Premium for your life insurance policy?
Answer – The policies will be terminated in case of non-payment of the premium in Term Insurance. In the case of ULIP (Unit Linked Insurance Plan) if you miss the premium payment in the first 5 years which is called the lock-in period of the policy, your policy will be terminated and the premiums paid by you will be moved into a discontinuance fund area which will only be refunded after the lock-in period of the policy.
Question – How to Reinstate Your Life Insurance Policy?
Answer – First step – Application for Reinstatement, Second step – Insurability Proof, Third step – Medical Check-up
