Life insurance protects your family from financial loss. No one can compensate for emotional loss but financial loss can be protected through insurance. Life Insurance gives you and your loved ones peace of mind; hence, all premiums must be paid in time. Else your policy will lapse and it will not serve the purpose.
However, it is critical to understand the consequences if you are unable to continue paying your life insurance premiums. Today we will look at what happens if you stop paying your life insurance premiums and the possible implications. It’s critical to understand these aspects in order to make informed judgments and take the required steps to protect your insurance coverage.
What is Life Insurance Premium?
Life insurance is a contract where you agree to pay a renewal premium to keep the contract live. Premium refers to the amount of money that policyholders must pay to the insurance company in exchange for their life insurance coverage. You choose to pay an annual premium as per your convenience, i.e annual / half year / quarter and monthly. Insurance Samadhan always recommends paying the premium in the annual mode because it is always the most economical and effective.
Lapsed policy gets a grace period of 30 days under all modes except monthly mode, where you get a grace period of 15 days. The grace period means that your policy can be revived without any medical declaration and in case of death during the grace period, the claim will be payable after taking out the unpaid premium.
After the grace period, the contract is not live and the claim will be paid as per policy terms and conditions.
All life insurance contract work under Section 45 of the Insurance Act, which says that a claim can not be rejected under non-declaration if the death happens after 36 months of an active new policy as well as reinstated policy. This means that all reinstated contracts after the grace period come under Section 45. Hence it is necessary that you pay your premium on time.
What if I can’t pay my premium?
If you fail to pay your life insurance premium due to unexpected circumstances, it’s important to understand the consequences. Let us talk about different life insurance policies and understand.
Term Insurance: Policy lapses after the grace period and all benefits terminate.
Endowment Plans: If your policy has generated surrender value, then your family can get a reduced sum assured so partial cover prevails, On maturity, a surrender value is paid.
ULIP: Risk cover discontinues and your fund value is transferred to a Discontinuance Fund with a 4% assured return. Your fund is also removed from the active market.
Can I reinstate the Policy?
Life insurance policies that have lapsed can be revived within 90 days. After 90 days, reinstatement would depend on. Insurance companies that offer special schemes to reinstate these policies require the payment of pending premiums, interest, and a Health Declaration form submission. The specific conditions for policy revival may vary depending on the insurance company’s policies. But you should remember that your policy contract once again will be subject to Section 45.
Important Things to Remember
Here are some important things to remember in such situations:
- Insurance is important hence go for Bank mandated.
- If you miss the premium payment deadline, you have a grace period to make the payment. Use this time to pay the premium and avoid any complications.
- If your life insurance policy has lapsed, contact the company to reinstate your policy.
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