LAPSED POLICY


1. What does the term "lapse" or "lapsation" mean for life insurance business and what are the implications for the policyholder?


There are three types of policies - single, regular and limited premium paying policy.


Single premium policies - The premium is paid only once i.e. at the time of policy commencement for the entire term. Therefore, question of lapsation does not arise for single premium policies.

Regular/ Limited premium policies - The premium is payable by the policyholder at regular

intervals during the premium paying term. The premium payment term and frequency is shown on the policy certificate. The company allows a grace period of 30 days for half yearly and yearly frequency and 15 days for monthly frequency. A regular/ limited premium policy lapses if the premium is not paid on the due date and during the grace period. If a policy is not in the premium holiday period it is necessary to pay premium on the due date or during the grace period

Depending on the terms and conditions mentioned in the policy document, life cover and other benefits payable under the policy cease or are reduced once the policy is lapsed/ paid up, however, the policyholder will continue to have the benefit of investment in the respective unit funds.


2. Would the life cover and other benefits be available during the grace period where the premium is not paid on the due date?


The policy would enjoy the life cover and other benefits during the grace period. However, if the premiums are not paid within the grace period the policy would lapse/ become paid up.


3. Are the premiums returned to the beneficiary in the unfortunate event of life assured�s death while the policy remains lapsed?

There is no provision to pay any amount in a lapsed policy unless specifically mentioned in the policy contract.

Comp/doc/Dec/2008/891