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.
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 unable 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
Conclusion
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 premium as lump sum, monthly, half-yearly or yearly. You can also automate 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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FAQs
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 does it mean if your policy lapsed? ›
A lapse occurs when the benefits and rights stated in a contract no longer remain active due to the contract holder failing to honor requirements and conditions set forth by a contract or agreement. A lapse can occur, for instance, due to inaction, the passage of time, or failure to pay what is due.
Can I get my money back if my policy lapsed? ›
Insurance Lapse Meaning
In such cases, the policy lapses and all benefits and coverages offered are terminated if the due amount is not paid by the end of the grace period. Usually, there is no provision for a lapsed policy refund for insurance policies.
Should I let my life insurance policy lapse? ›
If you no longer need or can no longer afford) your life insurance policy, don't let it lapse, says Frank Darras, a California attorney who specialists in insurance matters. Instead, consider selling it on the open market.
Can a lapsed insurance policy be reinstated? ›
Yes, it is possible to reinstate a lapsed insurance policy. Depending on the circ*mstances, you may need to provide proof of identity and relationship to the deceased insured in order for them to consider reinstating the policy.
What happens after policy lapse? ›
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.
How do I recover a lapsed policy? ›
1. If you want to revive the policy within six months after the date of lapse, you need to contact the insurer and pay the pending premiums along with the interest. 2. If you want to revive the policy after a lapse of six months, you need to pay the overdue premium, interest, and penalty.
What to do if you're the beneficiary of a lapsed policy? ›
The policy will lapse, and future payments will not restart coverage. If you would like to “reinstate” your policy, you must contact your insurance provider. Generally, companies require you to fill out another application and let them know if your health has changed.
Can a lapsed policy be revived? ›
Ans: Yes, you can revive your lapsed life insurance policy within 3 to 5 years of the revival period. The applicable revival period may be different for different plans. Thus, you should check with your insurer about how and when you can revive your lapsed life insurance policy.
Can I withdraw my lapsed policy? ›
Surrender Value
Thus, the policy acquires a surrender value only after it acquires a paid-up value. So, if you discontinue the lapsed policy and surrender it, you will get the surrender value, as per the terms & conditions of the policy and the coverage will be terminated.
When a policy lapses, the policyholder loses all the benefits and coverage provided by the policy, and the insurance company terminates the contract.
What is the lapse risk of insurance? ›
Lapse risk is defined as the rate of surrenders, as well as paid-up and other discontinuances, being higher or lower than the insurer's best estimate assumptions, where such difference results in a diminution of own funds.
How can you avoid a policy lapse? ›
To avoid letting your policy lapse, you can follow these tips:
- Review your life insurance policy regularly. ...
- Keep your contact information up-to-date. ...
- Pay your premiums on time. ...
- Set up automatic payments. ...
- Review your coverage regularly.
What does Policy Lapse Mean? A policy lapses when a life insurance policy is no longer active. It may lapse for a variety of reasons, but the most common reason is non payment of premium. If you do not make the payments within the grace period, the policy will lapse.
Does lapsed insurance mean Cancelled? ›
Lapse of coverage is distinctly different than cancellation of an insurance policy in that lapse generally does not require notice to you, the insured, whereas cancellation generally does.
What is the difference between surrender and lapse of life insurance? ›
Surrender. A life insurance lapse occurs when you unintentionally fail to pay premiums, leading to an automatic termination of the policy. On the other hand, a surrender happens when you intentionally end your policy before its term, usually in exchange for the cash value it has accrued.
Can lapsed policy be revived? ›
Ans: Yes, you can revive your lapsed life insurance policy within 3 to 5 years of the revival period. The applicable revival period may be different for different plans. Thus, you should check with your insurer about how and when you can revive your lapsed life insurance policy.
What is the difference between lapsed and expired policy? ›
Generally, lapse means to end because of neglect or failure to act. Expire means to end at the appropriate and expected time. If I fail to make scheduled insurance payments, the contract will lapse and I will no longer be covered.
What does it mean to become lapsed? ›
expired; voided; terminated: a lapsed insurance policy. no longer committed to or following the tenets of a particular belief, obligation, position, etc.: a lapsed Catholic.
