One of the major advantages of insurance policies is that they are non-intrusive. You can essentially just invest in a plan and not worry about it. However, the only thing that you need to be careful about is to ensure that you pay your premiums on time to avoid an insurance policy lapse. Read on to find out more about the reasons behind why an insurance policy might lapse and to learn about what you can do in such a situation.

What causes an insurance policy lapse?

When you purchase an insurance policy, you essentially agree to pay a premium, which can either be a one-time payment or a recurring expense. This premium has to be paid within the due date specified in the policy document. Also, most insurers offer an extension to the due date. This is called a grace period. Generally, the grace period of 30 days last for yearly and half-yearly premium policies, and for about 15 days for monthly premium plans. 

If, by any chance, you fail to pay any of the premium installments within the prescribed due date, you’ll have to ensure that you make the payment before your grace period ends. If you skip this deadline as well, your policy is then said to have been lapsed. An insurance policy lapse puts you and your family at loss of financial protection. With a lapsed policy, you can no longer enjoy the protective cover and other benefits associated with the original insurance plan. This is exactly why it is of utmost importance to pay your premiums on time.  

So, what do you do when your insurance policy lapses?

If you have faced a situation where your insurance policy has lapsed, the very first thing to do is to not panic or surrender your policy. A lapsed policy is not the end of the road, as there is a way out of this predicament. Most insurers offer you the ability to reinstate a lapsed policy subject to certain terms and conditions. You can again become eligible for all the life insurance benefits offered by your policy by simply reinstating it. However, the following points should be kept in mind when you are trying to revive a lapsed insurance policy.   

1. An insurer is likely to offer only a limited window of time to reinstate a lapsed policy. You can activate your life insurance policy again as long as your revival application is within the time specified by the insurer.
2. You can also revive a lapsed policy within 5 years from the date of payment of the last premium by simply paying the pending premium amounts along with interest and penalties. 
3. Also, you may not have to furnish any fresh medical reports if you revive a lapsed policy within 6 months from the date of payment of the last premium. Payment of pending premium amounts with interests and penalties will be required to reinstate the policy.
4. If your insurance policy lapse exceeds 6 months, your insurer may ask you to submit a medical report or a declaration of your health.    

Before you go ahead and reinstate your life insurance policy, it is advisable to check with your insurer regarding the terms and conditions of revival. This is because many insurance companies come up with special revival schemes from time to time. You can utilize these schemes to get relaxations on interest, penalties, and medical requirements. 

Why should you reinstate an existing life insurance policy instead of getting a new one?

Most people think that getting a new policy is better than going through all the trouble for reinstating a lapsed policy. This, however, is a flawed argument. Briefly explained below are a few reasons why you should reinstate your lapsed policy instead of purchasing a new one.

1. Lower cost:

   The premium that you pay towards a revived life insurance policy is mostly lower than the premium that you would pay for a new one. This is because your age at the time of taking the old policy would have naturally been lower than the age at which you seek to obtain a new one as life insurance premiums tend to skyrocket as you get older.

2. Unchanged insurance cover and benefits:

   Opting for reinstatement of a lapsed insurance policy can ensure that you continue with the same insurance cover and benefits. However, there’s no guarantee for the same when you purchase a new policy.         

Conclusion

All things considered, an insurance policy is not merely a tax-saving tool. It is also a very effective way to secure the future of your family. By investing in a life insurance policy with an adequate cover in place, you can ensure that your loved ones get the maximum financial benefit in case something unfortunate happens to you. Additionally, getting yourself a good term insurance plan with low premiums is so easy that you can even do it online from the comfort of your own home. Keep in mind that it’s important to pay your premiums on time, so your life insurance policy or your term insurance plan does not lapse.

Browse the website to know more about Term Insurance and the various Term Plans offered by PNB MetLife.

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