Life insurance is a great tool to secure your loved ones and yourself against life’s uncertainties. If you opt for a policy with hassle-free claim settlement and get the appropriate riders like a critical illness cover, you and your family will have a well-rounded protection during times of need. However, it is important for you to ensure that your policy remains active by paying your premiums regularly. When the premium for a policy is not paid on time, it may lead to a lapsed insurance plan.
Let us find out more about policy lapse and how to avoid it.
What is a life insurance policy lapse?
Policy lapse is a situation where you can no longer avail the benefits and cover provided under a policy. Once your policy lapses, you cannot use any feature of the policy and will lose the right to make a claim against it.
What causes a policy lapse?
There are numerous reasons for which you may miss out on paying your premium on time. However, your policy does not lapse immediately, even if you miss the due date of payment. Insurance providers offer a grace period during which time the benefits enjoyed under a policy remain active.
In most cases, the grace period is 30 days from the day on which your premium was due4. You can make your payment during this time and your insurance policy continues without any hiccups. However, if you are incapable to do so, the insurer has the option to cancel your plan, resulting in a policy lapse.
Is it possible to restart a lapsed insurance policy?
Most insurers allow a specific period within which you can restore your life insurance plan. This period can differ from one company to another. It also depends on the type of life insurance plan you opt for. Based on your payment history and nature of policy, most insurance companies levy an interest as a penalty for the missed premiums. To reinstate your policy, you just have to pay the premium amount due, along with the interest. Once these dues are paid your lapsed policy will be reinstated allowing you to continue enjoying the same benefits as before.
How to avoid life insurance policy lapse?
Here are some ways in which you can avoid getting your policy lapsed:
- Purchase a ‘no-lapse insurance’: Opting for a single premium life insurance plan eliminates the chances of a policy lapse occurring due to non-payment of premium. You simply pay the premium once and ensure that your loved are covered for the entire duration of the plan
- Sign-in for an auto-debit feature: Choosing the auto-payment feature ensures a steady payment schedule. This can be set up monthly, quarterly, or annually, depending on your budget and suitability
Most insurers offer a way to reinstate your policy if it gets lapsed. However, it is advisable to ensure that your insurance policy always remains active. With our term plan, ICICI Pru iProtect Smart1, you can provide financial protection to your loved ones with a life cover2 along with a critical illness cover3 for you. You can choose to pay premiums as a one-time single or chose to pay it monthly, half-yearly or yearly by automating the payment of your premiums so that you never miss on the deadline. Our 24x7 digital channels allow you to pay premiums digitally too. Thus, you can avoid going through unnecessary stress and ensure that your loved ones are always protected.
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1 ICICI Pru iProtect Smart offers four variants namely ‘Life’, ‘Life plus’, ‘Life and health’ and ‘All in One’ with different benefits. “All in One” is one of the four variants offered under iProtect Smart having all benefits offered under other ICICI Pru iProtect Smart variants namely Life, Life plus and Life & health. The customer can choose any one variant from the four available variants. Please refer to the product brochure for more details
2 Life Cover is the benefit payable on death of the life assured during the policy term
3 Accelerated Critical Illness Benefit (ACI Benefit) is optional and available under Life & Health and All in One options. This benefit is payable, on first occurrence of any of the 34 illnesses covered. Medical documents confirming diagnosis of critical illness needs to be submitted. The benefit is payable only on the fulfillment of the definition of the diagnosed critical illness. The ACI Benefit, is accelerated and not an additional benefit which means the policy will continue with the Death Benefit reduced by the extent of the ACI Benefit paid. The future premiums payable under the policy will reduce proportionately. If ACI Benefit paid is equal to the Death Benefit, the policy will terminate on payment of the ACI Benefit. To know more in detail about ACI Benefit, terms & conditions governing it, kindly refer to sales brochure. ACI Benefit term would be equal to policy term or 30 years or (75-Age at entry), whichever is lower
4 Under ICICI Pru iProtect Smart, a grace period for payment of premium of 15 days applies for monthly premium payment mode and 30 days for other modes of premium payment, without any penalty or late fee, during which time the policy is considered to be in-force with the risk cover without any interruption, as per the terms and conditions of the policy. If the premium is not paid within the grace period, the policy shall lapse and cover will cease