Your insurance company has convinced you about the importance of buying an insurance policy. You are also looking to save tax. So you go ahead and buy an insurance policy. But after some time you find it difficult to keep on paying the insurance premium. It could either be due to job loss or unforeseen expenses or you have relocated to a new city/country. As a result your policy lapses and you end up losing life cover.
Primarily there are two kinds of insurance policies. One type of policy is simple insurance without any investment, also called as term policy. The other type is an insurance policy with investment option. In case of the former, if you fail to pay the premium regularly, you can say the policy has lapsed. Lapsing of insurance policy is quite common. In the latter case, if you fail to pay your premiums then you end up paying the costs for the full period of insurance policy. These costs are deducted from the value of the amount invested. So you end up getting hardly anything, if you don't pay the premium regularly.
In order to prevent the lapsing of policy, it is advisable to keep insurance and investment separately. It has a three-fold advantage. First, if you opt to cancel your policy, you don't suffer any financial loss. Also, it is simpler to track your investment. If you are ever in financial need, you can always redeem these investments and use the money to meet your needs. Alternately, you can just stop your investment plans. It won't affect your insurance cover. Lastly, pure investment plans are simpler and cheaper.
But your policy has already lapsed and you want to revive it. What do you do? How do you revive a lapsed policy?
Well, for reviving a lapsed policy, you need to pay the unpaid premiums along with the interest. In certain cases, you may also have to undergo health checkup. Here are three ways in which you can revive your policy:
Ordinary revival: If you opt to revive the policy within six months from the period of first unpaid premium, you need not give any personal statement on the condition of your health. You just have to pay delayed premium along with the interest. This rate of interest will be decided by the date when the policy first came into effect.
Revival on non-medical grounds: In this case, the sum to be revived must be lesser than the approved limit for non-medical assurance purchased by the life assured.
Revival on medical grounds: This option is available only if the previous two options have failed. You have to undergo medical tests, which will be decided by the sum to be revived.
It is essential you have an open discussion with your insurance agent to find out the best course of action for your problem. However, it is essential to remember that you should not let the policy lapse as far as possible. It will prevent you from subsequent tensions on policy revival.
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