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What is the process of reactivating lapsed life insurance policy?

When it comes to the reinstatement of lapsed life insurance, there are few things to consider. Click here to know the steps on how to revive the lapsed life insurance policy.

  • 15,957 Views | Updated on: Feb 27, 2024

Life insurance policies work on yearly premium basis. The basic idea is that you have to pay a fixed amount every year, known as premium, which is decided based on the life cover you take. However, if you cannot pay the premium on yearly basis for the fixed term, your policy is bound to get lapsed. It also straightaway cancels out all the benefits you were entitled to after the policy matures.
Therefore, it is of utmost importance that you pay your premium on time so you can enjoy the benefits you are entitled to in the first place. In this article, we will discuss about reviving a lapsed policy and cover all the information related to that issue.

When does a life insurance policy lapse?

When you buy life insurance, you can pay a premium at your convenience. The payment could be on a yearly, half-yearly, or monthly basis. If you are unable to pay the premiums because you missed the date or you do not wish to continue with the plan, your policy lapses. However, the insurance provider gives you a grace period, which usually lasts up to 15 to 30 days, depending on the terms of your particular policy. You can pay the premium and revive your policy within this period. The grace period in the case of quarterly, half-yearly, and yearly premium payment modes is 30 days. This period reduces to 15 days in case of monthly payments. Failing to pay your pending premiums even after the allowed grace period leads to policy lapse, resulting in losing all the benefits, exemptions and also the life cover associated with it.

How to avoid a life insurance policy lapse?

It is important to understand the significance of a life insurance policy and the security it offers to you and your family. Premium payments for life insurance policies are a full-time commitment and an important part of your financial plan.

Therefore, understanding how to plan insurance payment is necessary to avoid problems. Follow these simple steps to avoid failure of premium payments and ultimately protect your policy from lapsing.

Select the type of coverage you want

The first step is to figure out what kind of coverage you’ll need when it comes to insurance. Full coverage insurance is the greatest option for people who have a lot of money because it usually comes with higher prices. You do, however, have the alternative of purchasing a policy with the bare minimum of coverage. People are always confused with the minimal life insurance coverage an individual should have. This sort of plan covers you for a period of 5 to 20 years, resulting in lower monthly costs. Hence, you should choose a plan that fits your current budget so that you do not have to bother about burning holes in your pocket every time the premium payment due date arrives.

Choose a system of automated payments

Opting for an automated payment plan that ensures you never miss a payment deadline helps you pay your monthly, quarterly, half-yearly, or annual insurance premium on time, without fail.

Can you revive a lapsed life insurance policy?

The short answer is yes, you can. Irrespective of all the right tips you follow, you might still end up missing on the deadline to pay the premium in time. You don’t have to fret for failing to pay the premium on time. The secret here is that the insurance company still wants you to continue your policy. You just need to know how to do that. A very simple way is to call the insurance company and ask them how to do it. If even that is not happening, we are here to help you out. Check out our next section.

How to revive the lapsed insurance policy?

When it comes to the reinstatement of lapsed life insurance, you need to consider two things:

1.If you want to revive the policy within six months after the date of lapse, you need to contact the insurer and pay the pending premiums along with the interest.

2.If you want to revive the policy after a lapse of six months, you need to pay the overdue premium, interest, and penalty. The penalty amount depends on the policy you have. The insurer has the right to decide if the policy should be revived or not.

Some other key points you should keep in mind when reinstating or restoring a policy:

Reinstatement Form

Fill out the reinstatement application if you want to restore a lapsed term life insurance policy. It’s the same application you filled out when you first applied for the insurance policy.

Medical Check-up

This varies a lot depending on your insurance company. Medical examinations are not required in most situations if your reinstatement application is submitted within 90 days of the end of your grace period.

Current Health Status

The majority of companies will question your current health state to determine if anything concerning your health condition has changed since you submitted your initial application

What happens to the benefits in case of policy revival?

When the policy has lapsed, you do not get any type of insurance benefits. This needs to be confirmed with the insurer well in advance. Since a lapsed life insurance policy can be reinstated, you need to enquire if the benefits will be reinstated, as there could be changes as per your current life situation.
Life insurance is a critical investment that you must make to protect your future. There’s no denying that paying your premiums on time is vital to guarantee your family’s continued safety. Therefore, the best way to avoid payment failures is to plan ahead of time for insurance and properly arrange life insurance from the outset. If due to any unexpected reasons you fail to pay your premium, you must take quick action to reinstate your life insurance and continue to be covered.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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