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Features
Ref. No. KLI/22-23/E-BB/492
Life insurance is a crucial safety net that protects your loved ones financially in case of an unfortunate event. But have you ever wondered what happens if you stop paying life insurance premiums? Will your policy collapse? Will you get it back? Since premiums play a huge role in your insurance, knowing what happens if you do not pay it timely is important. Let us learn what happens when you miss a payment, what to do if your policy lapses, and how to avoid losing your coverage.
Life can always get busy, and in such situations, payments can slip through the cracks. You may, like any other person in this situation, wonder what happens if you stop paying life insurance premiums. So, if you do miss a premium payment, your insurance company will not immediately cancel your policy. Instead, most life insurance policies offer a grace period. It is a short period during which you can still make the payment without losing your coverage. It is mandatory for every insurance provider in India to offer a 15 to 30-days grace period to their policyholders as per the IRDAI rules.
For term insurance, if you do not pay your premium within the grace period, your policy will lapse, meaning you will no longer have coverage. For whole life or universal life insurance, the policy may temporarily use the accumulated cash value to cover the missed payments. However, once the cash value runs out, the policy will lapse. You can find more details about the grace period of your policies in the policy documents, so read carefully.
The grace period is usually around 30 days, but this can vary depending on the insurer. But what if you somehow even miss the grace period? Well, if you fail to make the payment within the grace period, your life insurance policy will lapse. A lapsed policy means:
Simply put, missing your grace period can have serious consequences. However, depending on your insurer, you may have options to reinstate or restore your policy.
If your policy lapses, all hope is not lost! You have two main options: buy a new policy or reinstate your old one. Let us explore both these options.
If your old policy lapses, you can consider purchasing a new one. However, this comes with challenges:
Reinstating your old policy is usually the better option as it is often cheaper than buying a new one and helps you maintain your existing benefits. Many insurers allow reinstatement within a specific period (usually 2–5 years) if you meet the following conditions:
Here are some simple tips to help you pay your life insurance premiums on time and avoid policy lapses:
Pick a premium that fits your budget to ensure you can pay it regularly. Avoid unnecessary add-ons that increase costs.
Enable auto-debit from your bank account so your premium is paid on time without you having to remember the due date.
Include your premium payments in your monthly expenses to stay on track. Budgeting apps can help you plan better.
Life insurance is too important for you to ignore. This is why people often think about what happens if you stop paying life insurance premiums. If you stop paying life insurance premiums, your policy can lapse, leaving you and your loved ones unprotected. Fortunately, in such situations, you get the option to reinstate a lapsed policy, but it is always best to keep up with payments in the first place. Just make sure to set up reminders, use auto-pay, or align payments with your budget to ensure your coverage remains intact.
1
If you stop paying premiums on a term insurance policy and do not make the payment within the grace period, your policy will lapse. This means you lose coverage, and your beneficiaries will not receive any payout if something happens to you.
2
Not immediately. Most life insurance policies offer a grace period (usually around 30 days), allowing you to make the payment without losing coverage. If you fail to pay within this time, your policy may lapse.
3
The grace period typically lasts 30 days but can vary depending on the insurer and policy type. Some insurers may offer shorter or longer grace periods.
4
Yes, many insurers allow policy reinstatement within a certain period (often 2–5 years). You will likely need to pay overdue premiums, possibly with interest, and may have to provide proof of insurability.
5
If you had a term insurance policy, the premiums you paid are lost. However, if your policy had a cash value component (like whole life insurance), you may be able to recover some of the value or convert it into a reduced policy.
6
Yes, if your policy lapses and you pass away, your beneficiaries will not receive the death benefit. Keeping your premiums paid on time ensures your loved ones remain financially secure.
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.
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
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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