Insurance policies are quite important nowadays owing to the tight financial situations most people live under, enabling them to make arrangements for any unfortunate emergencies. These policies are empowered by a certain Premium that has to be paid by the policyholder or consumer. This premium cost is determined by certain factors depending upon the type of policy subscribed to. For example, in life insurance, the age of the applicant, the nature of work he/she is indulged in, health condition, etc., will be considered. This premium has to be paid at regular intervals and such regular payment keeps the insurance policy alive and running. When the policyholder fails to pay this premium within the stipulated time, including the grace period provided by various Insurance providers, the policy is said to get lapsed or dead.
However, there is a way to revive a lapsed Insurance Policy. This is done by following the due process laid down by different Insurance providers.
A case study of a lapsed LIC Insurance Policy can make it easier to understand. A LIC policy lapses when the policyholder fails to pay the premium within the stipulated grace period, viz., minimum 1 month (Yearly/Half-yearly premium), and minimum 15 days (Monthly premium). It is important to note that such a lapsed policy can be revived up to 5 years from the date of lapse (1st instance of failure to pay the premium as mentioned above).
Different schemes under which the lapsed insurance policy can be revived
Ordinary Revival Scheme
- Pay a lump sum amount of all your unpaid premiums plus the amount of interest at the existing rate (Current rate being 8% per annum). This amount is to be calculated from the 1st unpaid premium, which caused the lapse.
- Form no. 680 (Declaration of Good Health) and Medical Report might be necessary if required.
Special Revival Scheme
- Beneficial for policyholders unable to pay the premium in a lump sum amount.
- This scheme is also special such that the date of commencement can also be shifted according to the age of the insured.
- Form no. 680 and Medical reports may be sought.
- Special Requisites:
- Can be used only once in the entire policy term.
- Can be used within 3 years of lapse only.
- The policy shouldn’t have acquired any surrender value, which means that this scheme can only be used within 3 years from the date of commencement of the policy.
Installment Revival Scheme
- Opted when the above-mentioned schemes don’t suit a policyholder.
- The amount to be paid is broken down into two broad categories:
- Payment to be made immediately
- Payment to be made in Instalments: Within 2 years, in equal installments, along with the regular premium.
|Mode of Payment||Amount|
|Yearly||Half of the Yearly Premium|
|Half Yearly||One Half of the Yearly Premium|
|Quarterly||2 Quarterly Premiums|
|Monthly||6 monthly Premium|
Survival Benefits cum Revival Scheme
- Used to revive Money-back policies, in which such Survival Benefits are due.
- The condition is that the Survival Benefits should become due earlier than the due date of revival.
- The issue of Payment:
- The amount of Revival is more than the amount due to the Survival Benefits – Extra amount to be paid by the policyholder.
- The amount of Revival is less than the amount due under Survival Benefit – Remaining amount to be paid to the policyholder.
Loan cum Revival Scheme
- Used for revival when the concerned policy acquires a Surrender value on the date of revival.
- The loan is taken based on premiums paid by the holder till that date.
- The issue of Payment:
- The Amount of Revival is more than the amount of loan – Extra amount to be paid by the Policyholder.
- The Amount of Revival is less than the amount of loan – Remainder of the amount to be paid to the policyholder.