Tag: lapsed policies

How you can give life to your lapsed LIC policy

Personal Finance

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LIC has announced a window of opportunity to revive lapsed life policies which will be open until October 22, 2021 for individual policies. The insurer periodically announces such opportunities for policy holders who have fallen behind. A similar offer was announced in November 2019 too.

Policyholders should utilise such opportunities, especially now, considering the heightened need for a risk cover. Reviving an existing policy with rates and terms of earlier periods can be beneficial and cheaper as well. Compared to reviving an older risk cover, the expected premium for new life covers from most insurance providers are expected to increase significantly in future. The increase in premiums is to compensate for higher claims post the pandemic and higher reinsurance costs for underwriting term, health, and life insurance policies.

Current scheme

In the current window, policies which are in the premium paying term and have not completed their policy term are eligible for revival. Lapsed policies, which are within 5 years from the date of first unpaid premium can be revived along with a concession on the late fee. According to LIC, the concession is not applicable to high risk covers such as term assurance plans and policies which are covering for multiple risks. Health and micro Insurance plans also qualify for the concession on the late fee.

For a total receivable premium of up to ₹1,00,000 (cumulative unpaid premiums), a late fee concession of 20 per cent is applicable up to a maximum concession of ₹2,000. Similarly, for receivable premium sum of ₹1,00,001 to ₹3,00,000, 25 per cent late fee concession up to a maximum of ₹2,500 and for premiums above ₹3,00,001, 30 per cent late fee concession is allowed up to a maximum of ₹3,000. While a concession on the late fee is being allowed during the specified time frame, there will be no concession on medical requirements.

Ordinary revival schemes

Most policies generally have a grace period of 15 days for monthly payments and one month for other payment frequencies such as quarterly, half-yearly and annual. Post non-payment within the grace period, the policy can lapse. The revival of such a policy is a fresh contract, with the insurer having the right to impose fresh terms and conditions. A lapsed policy can be revived by payment of accumulated premiums with interest and a penalty. You have to submit the relevant health documents too.

In an ordinary revival, upon receipt of unpaid premium plus current interest rate (around 8 per cent currently) within 6 months of the first unpaid premium, the policy is revived. A certificate of good health and medical report as per the policy demands may also become necessary. For a revival on medical basis, medical requirements based on policy specifications will be required for continuing the cover.

Even in ordinary circumstances (outside of the policy revival campaign currently underway), revival schemes are available for making a financially easier return to the insurance fold. But if one has missed more than a couple of premiums, the lump sum payment of the same can be become burdensome. LIC’s special revival scheme can be utilised in such situation. If a policy has lapsed for not more than 3 years (from the date of last unpaid premium), the scheme allows you to shift the commencement date, allowing for the payment of just one unpaid premium, calculated on the basis of age and applicable health conditions. Such an option is allowed only once in the entire policy term and the policy should not have acquired surrender value (reached after paying three full year premiums to LIC). Instalment revival, survival benefit cum revival scheme and loan cum revival scheme are other financially modified options available, if an ordinary revival or special revival are not appropriate for the customer.

In ordinary circumstances, insurance policies can be revived but only within a period of two years from the date of the last unpaid premium. The current offer allows for a five-year window to revive old policies and adds a discount to the late fees being paid as well. Amongst the many lessons taught by the pandemic, the most critical one has been the necessity of an insurance cover and LIC’s current campaign for reviving old policies could not have come at a better time.

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How to revive a lapsed LIC policy?

Personal Finance

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To offer some respite to life insurance policyholders, LIC recently launched a revival campaign to ensure benefits of the policy continue. The revival campaign encourages people to renew their policy by offering concession on late fees. So, if you have a policy with LIC, then you can revive your (individual) policies between August 10 and October 9, 2020. It is applicable for eligible plans subject to certain terms and conditions. Here is what you should know.

A life insurance policy offers continued financial security to you and your family, provided you, as a policyholder, pay the premium regularly. If the premium dues are left unpaid over a long period of time, the policy may lapse and you may lose all or part of its benefit. As part of its claim clearance offer, LIC is also encouraging policyholders to get their maturity amounts if they have missed making a claim on time.

Revival

Until premium dues are settled, with interest (penalty) chargeable by the insurer as a late fee (from the due date) along with the premium amount due, the policyholder will not receive the benefits of a life policy. A policy is said to have lapsed if the premium dues are not paid even after the grace period (30 days for yearly, half-yearly and quarterly premium payment and 15 days for monthly premium payment). In case of death of the policyholder when a policy has lapsed, if the policy has acquired surrender value, then claims will be settled to that extent by the insurer. If not, the policy loses all its benefits and no claims would be settled.

Usually, insurers allow you to revive your life policies within a period of five years along with penalty. Note that the penalty will vary with each insurer. For instance, LIC charges 9.5 per cent per annum as late fee penalty on premium dues. HDFC Life, too, charges 9.5 per cent per annum as interest on premium outstanding. At the time of revival, policyholders will have to pay total premiums due plus the penalty (interest) amount to reinstate the policy benefits.

Your policy document will state whether your policy is eligible for revival if it has lapsed. Beyond five years, insurers may allow for policy revival on a case-to-case basis.

In the case of LIC, in its recent revival campaign, you get to revive certain policies within five years from the date of the first unpaid premium (from the date you stopped paying premium). It is not applicable for high risk plans, including some term insurance, health insurance and multiple risk policies. High risks policies are those that, for instance, involve repayment of double/triple sum assured on maturity. LIC is offering late fee discounts to encourage policyholders to make the premium payment. If your total premium is up to Rs 1 lakh, then you get a late fee discount of 20 per cent (on late fees) with maximum concession amount limited to Rs 1,500. For premium amount between Rs 1 lakh and Rs 3 lakh, the late fee discount is 25 per cent (maximum concession is up to Rs 2,000) and for premium above Rs 3 lakh, the late fee discount is 30 per cent (concession capped at Rs 2,500).

How to revive

Policyholders can revive the policy with the insurer directly by paying the interest charges for late payment. Keep in mind that it is left to the discretion of the insurer to accept or reject the policy (although rejection is rare). Once the policy is revived, the benefits from the policies are also reinstated.

In the case of LIC policies, you can contact the agents or visit the branch to complete the revival process. It is more or less the same for other insurers as well. You can also call your insurer’s customer care to find out about revival procedures.

But, generally, it is better to keep the policy active by paying premium dues on time. Insurance companies usually send a premium reminder through mail or message or both.

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