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If you want to keep your life insurance policy active, you need to make premium payments in a timely fashion. But what if you miss a premium payment or stop paying life insurance premiums? Read on to find out what happens!
Life insurance plans act as a financial weapon in the face of various unforeseen events such as sudden demise, permanent or total disability, terminal illness and so on.
To enjoy this type of coverage, a life insurance policyholder is required to pay the decided premium amount on or before the specified due date.
However, life can get very stressful at times, and sometimes it becomes difficult to pay the insurance premium amount on time or altogether.
But what happens in such a case? This is what we will discuss in this blog.
What if You Stop Paying Life Insurance Premiums - Understanding Grace Period
In case you have missed paying your life insurance premium due to some urgency, you need not worry, as you will enter the grace period of the policy.
The grace period refers to the extended period provided by an insurance provider during which you can pay your premium without having your policy cancelled or being subjected to late payment penalties. You can make payments during this period and continue enjoying your coverage as usual.
As per IRDAI regulations, every insurance provider in India must provide a grace period of 15 to 30 days to their policyholders. You can find more details about your life insurance grace period in your policy documents. If not, you have the option to get in touch with your insurance company.
What if You Miss Even the Grace Period?
Now, what if you are unable to make the premium payment during the given grace period?
In this case, your policy will lapse. But the good thing is you can reinstate or restore it by following a simple process mentioned in the later section.
However, if you have stopped paying the premium willingly, then your policy will be cancelled. Note that some insurance providers may not offer refunds for the premiums you have paid earlier. Even if they agree to do so, they deduct a huge amount in the form of taxes.
How to Reinstate a Lapsed Life Insurance Plan?
The process to reinstate or restore a life insurance plan varies from one insurance provider to another. However, here is a standard approach followed by most companies:
- Request Policy Reinstatement: The very first step is to confirm whether or not your insurance provider offers the policy reinstatement option. If yes, you will need to request them to reinstate your lapsed policy.
- Provider Proof of Insurance: Most insurance providers require continuous proof of insurability. You can provide them with the receipts of previous premium payments and claims (if any).
- Medical Checkup: Depending on your insurance provider, you may be asked to undergo a health check-up to learn about the changes in your medical condition.
- Penalties and Payment: Once your request to reinstate an existing policy is approved, you will be required to pay the premium amount along with the penalties that are imposed.
Once everything is done, your insurance provider will update you regarding the restoration time. Upon a successful restoration, you will receive a confirmation text or email with your registered contact details.
3 Tips to Make Timely Premium Payments
Following are some tips that will help you make the premium payments on time and avoid your life and term insurance plans being lapsed:
Choose Your Premium Amount Wisely
The biggest reason why most people stop paying premiums after some time is a higher premium amount. You can avoid this situation by selecting your premium and deductibles according to your financial situation and budget.
Moreover, consider customising your life insurance plan as per your needs. This will save you from paying for unnecessary insurance features and add-ons.
Set Automatic Payments
To avoid missing premium payments, consider setting up automatic payments. This feature will free you from the hassle of remembering the due date of payment. The specified premium amount will be automatically deducted from your registered bank account when the due date comes.
Include Premiums in the Budget
For better financial planning, include your premium payment in the monthly budget. You can also utilise various budgeting apps for the same. This small habit will help you keep track of your expenses and save a fixed amount for paying the policy premiums.
While these tips sound basic, they have proven to be highly effective for making insurance premium payments in a timely manner. So, make sure to stick to them if you want to have continuous life insurance coverage.
Final Words
Life insurance plans are critical for effective financial planning and management. The right policy helps you mitigate the financial risks arising from unprecedented situations.
However, if you stop paying life insurance premiums after some time, your policy will be cancelled by the insurance provider. In this scenario, you can either choose to reinstate your old policy or buy a new one altogether.
If you don’t have the budget for permanent life insurance plans, you can invest in term insurance plans. While they offer coverage for a limited term, they are much more cost-effective as compared to life insurance plans.
For more information on life and term insurance plans, contact us!
