How to Restart Lapsed Insurance Policy
A Lapse Insurance Policy happens when you have not been paying your premiums for quite some time. It may happen to any of us resulting to a lapse policy. This could be devastating as you or your dependents may not get any benefit out of what you have already invested and this may fail the purpose of your long term investment. The good part is that most of the traditional policies can be restarted, subject to certain impositions from the insurer.
If the policy has been in force for at least 3 years
As per insurance laws, if your policy has been in continuation for at least three years, you get up two years to revive your lapsed policy. In certain cases, few insurers, especially government insurers have special schemes within which you can restart your policy for up to five years from the lapse date. The good part is that if you pay the lapsed policy within 6 months; the process might be as simple as just paying your overdue premium.
Overdue Premium and Penalties
In case when you restart the policy after six months from the date of lapse, you would be required to pay the overdue premium, penalty fees and interest payment which could be as high as 12-18% of the premium amount.
Impositions and Discretion of Insurer
At the time of revival, your insurer might impose lot of terms and conditions or at times decline your request for policy revival. The more the tenure of your policy lapse is, you become more dependent on the insurer’s discretion. They may or may not approve your request. They may ask for lot of documentations and even a medical certificate to restart you lapse insurance policy.
As we say, ‘prevention is better than cure’ stands quite true when it comes to paying your insurance premiums on time. If you plan your premium and your finances properly, you may avoid encountering such situations in your life.