Revival of a Lapsed Life Insurance Policy- Business News

Revival of a Lapsed Life Insurance Policy

The benefit of the insurance can only be revived by the policyholder before the maturity period if it is allowed by the insurer.

Naval Goel   
  • November 30, 2016  
  • |  
  • UPDATED   16:19 IST

Naval Goel
Naval Goel-
The life insurance policies generally lapse if the premiums are not properly paid within the grace period. Therefore the benefit of the insurance cannot be obtained for providing the financial security to the dependents, if death incident occurs to the insured. It can only be revived by the policyholder before the maturity period if it is allowed by the insurer. The process of the revival depends upon the duration and the type of the policy.

Reinstatement: For the reinstatement or the revival of the lapsed policies, some documentation procedure is required between the lapse date and the request date of the revival. These are the reinstatement documentation when the revival request has been made by the policyholders.

Process Statement: The insurance or the health certificate is provided through a statement by the insurance company. The document requires to be duly filled in with the signature. The document should also be supported by the address and the identity proof of the insured.

Payment of Premiums: For reviving the lapsed policy, the premium can be paid after the lapsed period with a specific rate by the insurer. The company may also charge some penalty over the amount.

Types Of The Revival Schemes:

Ordinary Scheme For Revival: If you are possessing the life insurance policy with the local branches, you just need to approach them with the request of the revival quotation. Along with the documents of the Declaration of Good Health (DGH), you are required to deposit all the due premiums with the policy. If any medical report is required, especially depending on your age, you should also submit them.

Loan-Cum-Revival Scheme: With this scheme, a loan can be taken by the policyholder in his or her name. The loan amount can be adjusted with the premiums. Even if the paid up value of the policy has not acquired, the policy can be revived. Until the revival date, the amount of the loan is calculated as if the policy is within a forced condition. This particular scheme can be very helpful if the policyholder is unable in paying the lump sum revival amount at that time.

Special Revival Scheme:  For reviving the policy, the policyholder may be sometimes unable to pay the entire due amount of the premiums. In most of the cases, the paid up value of the policies occurs after 3 years. Though the document requirements will remain the same as the ordinary revival scheme, the difference between the old and the new premium can be deposited with all the due premiums. The consent of the policyholder is required in this scheme as the maturity date will get changed.

Revival by Installment:  The revival procedure can also be allowed through the installment method. If the policyholder is not in the position for clearing up the dues, the policy can be revived, especially if the arrears are not more than a year. In this method, the premiums can be cleared in 6 installments in monthly basis or 2 premiums in quarterly basis.

Losses From The Lapsed Policies:  If you are possessing a lapsed policy, what could be the general losses?

  • The death benefit or the accident benefit will not be available
  • Before acquiring the paid up value, if the policy gets lapsed, the premiums paid to the insurer may be forfeited
  • Surplus from the shares or the bonus cannot be obtained
  • The income tax rebate is not allowed if the policy lapses within 2 years of the conventional life insurance policy
  • The income tax becomes payable as the deduction gets added to the relevant year

Requirements For Revival:  The requirements for the revival of the life insurance policies mainly depend on the factors like the occupation and the health of the insured, age of the life assured , coverage amount, policy period already running etc. If the assured wants an automatic revival method, he can opt for it by paying the arrears with the interest of the premium. A proof of good health should be presented with an authorized medical report or the declaration of good health.

Good Faith: Revival of lapsed life insurance policy is similar to buying a new insurance policy. The documents will help in deciding whether to accept or decline the risks of the revival. Ensure that the rates, terms and conditions, policy proposals are feasible for you before taking the decision of revival. Therefore, revival option of life insurance policy provides various advantages to the policyholders. The policyholders can enjoy the continuation of the life coverage at lower premiums; bonus can also be gained during the period when the policy is lapsed. You can also gain various tax advantages by reviving the lapsed policies. So keep your life insurance policy alive and kicking in the best ways possible and revive it if it gets lapsed!