How to Revive a Lapsed Life Insurance Policy?

Life insurance policies are designed to protect the financial future of your loved ones in case of your untimely demise. It is a smart investment that ensures that your family members have a financial safety net to fall back on in the event of an unfortunate incident. However, in some cases, policyholders may miss paying their premiums on time, causing their policy to lapse. In such situations, the policyholder can revive their lapsed policy and continue enjoying the benefits of their life insurance policy. In this article, we will discuss the steps that you can take to revive your lapsed life insurance policy.

Understanding Lapsed Policies

A lapsed policy is a life insurance policy that has not received its due premium payments within the grace period specified by the insurance company. The grace period usually ranges from 15 days to 30 days, depending on the insurer. After the grace period, the policy is considered lapsed, and the policyholder loses all rights and benefits under the policy.

Reasons for Lapsed Policies

Lapsed policies can occur due to a variety of reasons, such as financial difficulties, forgetfulness, or ignorance of policy terms and conditions. Many policyholders may miss paying their premiums on time due to financial emergencies or other unforeseen circumstances, leading to their policy lapsing.

Consequences of a Lapsed Policy

When a life insurance policy lapses, the policyholder loses all rights and benefits under the policy. The policyholder’s family members will not be eligible to receive any death benefit in case of the policyholder’s untimely demise. Additionally, the policyholder may also lose the cash value and accumulated benefits that they had accrued under the policy.

Steps to Revive a Lapsed Life Insurance Policy

If your life insurance policy has lapsed, you can still revive it by taking the following steps:

1. Contact the Insurance Company

The first step in reviving a lapsed life insurance policy is to contact the insurance company and inform them about the policy’s lapse. The insurer will provide you with the details of outstanding premiums and interest that need to be paid to revive the policy.

2. Pay Outstanding Premiums and Interest

To revive your lapsed policy, you need to pay all the outstanding premiums and interest charges levied by the insurance company. You can make the payment through various modes such as online payment, cheque, or cash payment.

3. Submit Required Documents

After paying the outstanding premiums, you need to submit the necessary documents such as a revival application form, medical certificate, and other relevant documents as required by the insurance company.

4. Medical Checkup

In some cases, the insurance company may require a medical checkup of the policyholder before reviving a lapsed policy. This is to ensure that the policyholder is still insurable and does not have any pre-existing medical conditions that may impact their eligibility for the policy.

5. Policy Reactivation

After completing all the above steps, the insurance company will reactivate the policy and restore all the benefits and rights that the policyholder was entitled to before the policy’s lapse.

Things to Keep in Mind While Reviving a Lapsed Policy

While reviving a lapsed life insurance policy, you need to keep the following things in mind:

1. Time Limit to Revive a Lapsed Policy

The time limit to revive a lapsed policy varies from insurer to insurer. Generally, policyholders have a grace period of 2-3 years to revive their lapsed policy. If the policy is not revived within the specified time limit, it becomes permanently lapsed.

2. Insurability

The insurance company will conduct a medical checkup of the policyholder before reviving a lapsed policy. If the policyholder is found to have any pre-existing medical conditions or health issues, the insurance company may charge a higher premium or reject the revival request altogether.

3. Reinstatement Clause

Most insurance policies have a reinstatement clause that allows policyholders to revive their lapsed policy within a specified time limit. The policyholder needs to fulfill the conditions mentioned in the reinstatement clause to revive their policy. It is important to check the reinstatement clause before purchasing a life insurance policy to avoid any confusion or inconvenience later.

4. Higher Premiums

Reviving a lapsed policy may attract higher premiums, especially if the policyholder has any pre-existing medical conditions or health issues. The insurance company may also charge an interest on the outstanding premiums that need to be paid to revive the policy.

5. Limited Benefits

Reviving a lapsed policy may come with limited benefits compared to a new policy. The policyholder may lose some of the benefits or riders that they had chosen while purchasing the policy initially.

Conclusion

Reviving a lapsed life insurance policy is crucial to ensure that your loved ones receive financial protection in case of your untimely demise. It is important to check your premium amount by using life insurance calculator, pay your premiums on time and understand the policy terms and conditions to avoid a policy lapse. If your policy has lapsed, you can still revive it by following the steps mentioned above.

FAQs

Can I revive my lapsed policy after the grace period?

Yes, you can revive your lapsed policy within the specified time limit mentioned in the reinstatement clause of your policy.

Will I have to undergo a medical checkup to revive my lapsed policy?

In some cases, the insurance company may require a medical checkup before reviving a lapsed policy.

Will reviving a lapsed policy attract higher premiums?

Reviving a lapsed policy may attract higher premiums, especially if you have any pre-existing medical conditions or health issues.

Will I get tax benefits after reviving my lapsed policy?

If the policyholder revives their lapsed policy within the stipulated time limit, they can continue to avail of the life insurance tax benefits associated with their policy. However, if the policy has lapsed for an extended period, the policyholder may not be eligible for tax benefits until the policy completes a certain number of years after revival. It is always advisable to consult a tax expert or a financial advisor to understand the tax implications of reviving a lapsed policy.

Will I lose any benefits or riders if I revive a lapsed policy?

Reviving a lapsed policy may come with limited benefits compared to a new policy. You may lose some of the benefits or riders that you had chosen while purchasing the policy initially.

What should I do to avoid a policy lapse?

To avoid a policy lapse, you should pay your premiums on time and understand the policy terms and conditions. You should also keep track of the grace period and the reinstatement clause of your policy.