A person takes an insurance policy to have the financial security of self and loved ones in case of uncertain events and emergencies. As life deals with several uncertainties the need for insurance has become extremely important. In the absence of any financial security, the loved ones might face a financial crisis if proper insurance is not done. However, the coverage of the insurance policy continues when there are regular premium payments. If there is any default in payment of these premium amounts, it leads to the lapse of the policy and no risk coverage would be there. How to revive or reactivate or reinstate lapsed life insurance policy?
Why insurance policy would get lapsed?
There are various life insurance plans. Whenever we buy an insurance policy, to have the coverage benefits of the same, we need to pay regular premium payments. These premium payments are mandatory to ensure that the policy continues to offer us the benefits covered under it. If for any reason the policyholder/premium payer fails to pay the premium amount the policy might lapse. Such an issue of missing the premium payment can happen because of negligence, financial stress new policies, investments, and so on. However, there is a grace period that is provided to the insurer before the policy is considered to lapse and it can be activated by payment of the premium as well as following the guidelines under the particular policy.
How to revive your lapsed life insurance policy?
If the insurance policy has lapsed because of non-payment of premium the same can be paid within the grace period and the policy can be continued.
However, in case, the grace period is over, the policyholder needs to go through the process of reinstatement to reactivate the lapsed policy.
In the case of a life insurance policy, if the death of the person whose life is insured occurs during this grace period, the insurance company is still liable to pay the insurance amount. However, in case the grace period is also over the insurance policy stands inactive and the insurance company has no liability to pay for the insurance amount unless the process of reinstatement is duly complied with.
Reinstatement would include payment of the due premium and interest amounts. This process of reinstatement to reactivate the lapsed policy would work only if the grace period for the payment of premium has ended and the contract which was between the insurance and the policyholder is not valid anymore. Generally, insurance companies accept to revive the policy within 2 years after the lapse of the policy.
How to revive/reactivate/reinstate lapsed life insurance policy?
You would have brought a smart term insurance plan, but unless you keep it active, it would not benefit when your family really needs. If the policy is lapsed for various reasons, you need to quickly reactivate/reinstate. The process of reinstatement has different rules that need to be followed from one insurance company to another.
In the case of health Insurance policies, there might be a need to resubmit a few of the latest check-up reports. In case of other insurances that might be needed for certifications, payment of due premium amounts as well as add-on penalty if applicable to reactivate the policy.
If the policy is revived within six months from the date of lapse the procedure is comparatively simple and can also be done online. They need to make payment of overdue premiums along the interest amount.
If this period is more than six months from the date of the policy lapse to revive the policy the insured has to pay the due premiums along with an interest at the rate of 12% to 18% and a penalty depending upon the norms of the policy. This is usually accompanied by a few more medical tests and other certifications.
It has however been seen that even if the policy has lapsed because of non-payment of the premiums due and the insurer has an option of buying a new policy, it is better to continue with the previous policy as it costs less as compared to the new policy altogether.
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