Worried about a lapsed life insurance policy? Now, LIC has introduced a facility to revive policies that have remained lapsed for over two years.

The measure will be available for policies purchased after January 1, 2014. A traditional, non-linked policy which has lapsed can be revived within five years of the first unpaid premium while a unit-linked policy can be revived within three years.

“The policies which have lapsed for more than two years and were not allowed to be revived earlier can also be revived now,” LIC said in a statement on Monday, adding that this will help ensure financial security.

Persistency ratio

The move will also help LIC improve its persistency ratio, an issue that many life insurers struggle with. For the quarter ended March 31, LIC’s 13th month persistency ratio was 57 per cent (by number of policies) and 69 per cent (by annualised premium). For the 25th month, it came down to 53 per cent and 64 per cent, respectively.

“There are circumstances when one is unable to continue paying premiums and the policy lapses,” remarked Vipin Anand, Managing Director of LIC. “It always makes better sense to revive an old policy than discontinue it and buy a new policy to restore insurance cover.”

LIC had approached the Insurance Regulatory and Development Authority of India (IRDAI) for extending the benefit of longer revival period to policyholders who bought policies after January 1, 2014.

Earlier norms

Policies tend to lapse if the premium is not paid within the due date. Under IRDA Product Regulation, 2013, which came into effect on January 1, 2014, the revival period was restricted to two consecutive years from the date of first unpaid premium. So, all policies taken after January 1, 2014 could not be revived if they remained lapsed for more than two years.

Insurers generally send premium reminders via letters, emails and text messages to policyholders.

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