What if you missed paying your life insurance premium?

Life insurance is an essential financial tool to ensure protection, especially during uncertain times. However, the number of policies that lapse every year in India is surprisingly very high.

There are primarily two reasons for this: the lack of awareness about insurance and other related products and the non-feasibility of the policy due to changes in one’s life’s goals or change in one’s investment pattern. It is often learnt that one has invested in a life insurance policy in order to get tax benefits at the end of the financial year only and might not want to continue with the protection cover. 

Regular life insurance premium payments are required to keep your coverage active. If your periodic life insurance premium payment is missed, you must know the probable consequences and should work towards renewing the policy accordingly with your insurer. 

Usually, a reminder is sent by the insurer for payment of premium and the policyholder is informed about a grace period of 30 days, during which the life insurance cover remains active. However, once the grace period is over, the insurance cover ceases. 

In case of traditional endowment life insurance policies, if the premium is not paid any time before three years, the policy becomes ‘lapse paid up’ after one month’s grace period from the date of renewal payment. If the same scenario occurs after three years, the policy becomes ‘paid up’. 

To put it simply, if one misses out or forgets to pay premium during the policy period, the person can revive the policy and insurance cover only within the stipulated time. Delaying the process may deprive the person of life insurance cover and suspend other benefits linked to it.

 If you don’t pay premium within the grace period, the policy will lapse. However, most insurance companies give you the chance to revive the policy through revival campaigns within the next two years
 You can surrender the policy and get the surrender value in return
 You can get paid-up value Insurers, today, are adopting innovative techniques to make sure that the customers renew their policies on time by communicating with them timely, be it via e-mails, SMS, IVRS, calls, letters, etc. Insurers are also making it a point to improve their distribution network and introduce multiple touch points by adopting technology. For example, renewal premium can be paid through ATM, online customer portal, Android-based applications, along with the traditional mode of payment and payment at bank branches. 

To protect yourself from cancellation of policy due to likely changes in your financial status, there are several things you should be aware of, especially if you are opting for monthly premium payments:

Enable automatic deduction of the life insurance premium payments from your bank account

Ask your company for a reinstatement of the policy but this may come at a price. Depending on your age difference from the time of inception to the time of the lapse, you may be required to prove insurability. This means that you will need to undergo a medical examination. In case there is a drastic change in your health condition during the interim period, there may be slight changes in the premium amount.

Pay your life insurance premium when it is due to avoid costly replacement of insurance or a lapse in coverage!

(The writer is Head of Marketing at Bajaj Allianz Life Insurance)