To offer some respite to policyholders, LIC recently announced a facility to revive life insurance policies that have remained lapsed for over two years. This is important, because your life insurance policy will only come in handy to meet your family’s financial needs in your absence, if premiums are paid regularly.

If the premium dues are left unpaid over a long period of time, the policy lapses and loses all or part of its benefits. This means, until the premium dues are settled, along with penalty levied by the insurance company, the policyholder would not have the benefit of a full cover, in case of an eventuality.

So, if your policy has lapsed, it may be wise to revive it. But the maximum time limit allowed for reviving a policy is two years (from the first unpaid premium). Hence, if your policy has lapsed for more than two years, you may not be able to revive it.

To offer some respite to policyholders, LIC recently announced 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.

It is possible that many other life insurers follow suit and allow you to revive a policy even after the two-year threshold.

In this context, what are the procedures to be followed for reviving a policy? Will the benefits remain the same? Can an insurer reject your policy while reviving?

We help you find answers.

Revival time

Across all insurance policies, if a policyholder defaults on premium payment, a grace period is allowed without any penalty. This is for a period of 15 days if your premium payment is on monthly basis and in other cases (quarterly, half-yearly and annual) the grace period is 30 days.

If your premium is unpaid beyond the grace period, interest or penalty is charged as late fee from the date on which your premium became due. The penalty charges vary with each insurer. For instance, Bajaj Allianz Life’s Guaranteed Income Goal policy charges 10 per cent per annum compounded half-yearly as revival interest. LIC charges interest of 9.5 per cent per annum.

At the time of revival

If you have decided to revive your policy, remember the discretion lies on the insurer to revive the policy. While rejection of policy is very rare, you as a policyholder may have to undergo medical examination. This is for the insurer to check if you have developed any illness, during the lapsation period. The premium will be charged accordingly but the benefit of the policy will remain the same.

If you are unable to revive your policy, the policy either lapses or benefits of the policy gets reduced and it would continue in this status until maturity or death of the policy holder.

In case of policies with investment benefits, the policyholder may get back the surrender value. But for this, the insured should have paid premium for a minimum period of time.

How to revive

Policyholders can revive the policy with the insurer directly by paying the interest charges for late payments. Insurance companies usually send a premium reminder through mail or message or both.

You can also call your insurer’s customer care to find out about the revival procedures.

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