Can a Lapsed life insurance policy be revived

Every Insurance policy has a fixed time duration for the premium payment, be it quarterly, half yearly or annually. Now, in case the policyholder does not pay the premium amount on time including the grace period ( which is a special provision made by the insurer in case the premium paying date is missed, the policyholder still has certain amount of time to pay the premium) the policy is considered to have lapsed.

What would be the consequences of a lapsed policy?

If the policy lapses, the benefits attached to the policy become void. Which means the purpose of a Life insurance cover is lost because in case of an unfortunate event of death of the policyholder the family would not get the financial cover or the benefits.

Life insurance companies have made provisions which would to help reversal of the conditions like lapsed policy also.

In case the policy gets lapsed and the policyholder wishes to revive the policy it is possible if done within a specified time period mentioned by the insurer before the maturity of the contract. Again, whether a lapsed policy can be revived or not depends on the duration for how long the policy has lapsed. The procedure of policy revival varies from one plan to another.

Procedure to Revive a Lapsed Insurance Policy:

The insurance policy is considered to have lapsed in case of nonpayment of premiums within the defined time. Let’s understand what can be done in case we miss out on paying the premium on time.

1. Grace Period:

This is the first step if the original premium paying date is missed out. It could be considered the first step of policy revival. The insurance companies grant a 15 days grace period in case of policies with monthly mode of premium payment and 30 days in case of policies with quarterly, half yearly or annual premium paying option. During this grace period all the policy benefits including the rider benefits remain intact but once this grace period is passed, the policy is said to have lapsed.

2. Re-instatement Period:

This is the next possible option to revive a lapsed policy. This period begins after the grace period is missed to revive the policy. Now, in the period the benefits applicable to the policy no longer exist but the policyholder is given the chance once more to reinstate or revive his policy by the insurer. The policyholder is required to clear all the premiums due along with interest if any. During the reinstatement period the policyholder might not be able to revive his policy at the premium rates applicable before the policy lapsed.

3. Paid-Up Period:

The policy would not lapse if the policyholder has paid the premium for more than 3 years. Even if reinstatement of the policy is not applied for, the policy remains intact the overall value of the policy reduces. This process is known as the paid up policy. The benefits in this case are given away to the policyholder on pro-rata basis

As per the life insurance laws, if for a particular policy the premium has been paid for continuous three years, the policyholder is entitled to policy revivals of up to two years. Traditional plans like endowment plans, term plans and whole life plans can be revived depending on the company policies. Each company has different policies for the same. The ULIP plans have the revival period of 45 days. If the policy is not reinstated within these 45 days of the original premium due date, the policy seems to have been surrendered and the policy benefits would to considered as seized. The policyholder can first compare the Term insurance Plan based on the plan selected.

Thus, it generally advisable to revive the policy within first six months of policy lapse since the process is simple and convenient. In comparison to this as time passes the process becomes very complicated and the penalty fees also become heavier as the time passes.