Reviving Lapsed Policy

Life Insurers are actively encouraging policyholders to revive their lapsed policies albeit current high-risk circumstances. Some Insurers are offering policies of eligible products that can be revived within five years from the date of the first unpaid premium. In addition, insurers are also offering a concession in the late fee for a few policies, except term assurance, health insurance, multiple risk policies and those that are high-risk in nature.

How to revive lapsed policies - an insurance policy lapses when premium are not paid on the due date and during the 30 days of grace period. Depending on the nature of the policy, it could either lapse automatically or allow a window for revival. Typically, insurers are required to offer a revival period of two years for policyholders to reinstate their policies. For the same, policyholders have to pay the due amount with interest or penalty.

Pure risk covers - in case of pure risk covers like term plans, the policy lapses if premiums are not paid even during the grace period. Policyholder may have to let go of the premiums as well as the assured benefit. For term plans, revival means that within three months the policy is reinstated with a health declaration form but beyond six months, the proposer will be asked to take the medical tests all over again. The need for medical tests may also change based on underwriting rules for specific products.

Unit-linked insurance plans (Ulips) - in the case of Ulips, you can revive the policy up to two years from the date premiums are not paid. If you skip paying the premium in the first five years or during the lock-in period, the policy is considered lapsed after a 90-day period and the insurer moves the fund value to the discontinuance fund and levies a discontinuance charge. If policyholder skips paying the premiums after the lock-in period, the insurer will give policyholder an option to revive the policy.

Traditional plans - if premiums are not paid for traditional plans before it acquire a surrender value (paid-up), then policyholder may lose all the premiums paid. But if the policy becomes paid-up, it doesn’t lapse and continues with a reduced sum assured. Traditional policies acquire surrender value after two to three annual premiums are paid. If it’s been more than two to three years since the policy lapsed, the only time a policyholder can revive it is if insurance company to offer a special campaign.