Life Insurance Awareness Month: How to revive lapsed LIC insurance policy? A step-by-step guide

How many people are aware of the importance of buying a life insurance policy? With the web publishing updates on how insurance has saved families from financial disintegration, many people are queuing up to buy these policies and include them in their investment portfolios. Observing ‘Life Insurance Awareness Month’ in September every year is a way to remind people of the need to buy insurance and ensure that they pay its premiums regularly.

However, there have been instances when many of the insured do not pay enough attention to their policies, thereby, allowing them to lapse of their own accord. This is ironic considering how these policies have the potential to provide a lifeline for both the insured individual and their family in unexpected situations when financial assistance becomes necessary. Most policies lapse when premiums are not paid on time.

According to the terms and conditions of the LIC policy, a lapse in the policy occurs if three consecutive premiums are not paid. Nevertheless, there exist exceptions to this regulation. In instances such as non-payment of premiums resulting from temporary illness or disability, the policy may not lapse. However, the policyholder must furnish LIC with evidence of their illness or disability to avail of this exception.

Why should you revive a lapsed LIC policy?

When an LIC policy lapses, the policyholder forfeits all entitlement to benefits provided by the policy, including the death benefit and maturity benefit. The sole means to regain access to these benefits is through policy revival.

LIC provides a 30-day grace period for premium payments. Should the premium not be settled within this grace period, the policy will lapse. Nevertheless, there is a window of opportunity for revival, extending up to two years from the date of the initial unpaid premium.

There are also several methods for reinstating a lapsed LIC policy. One option involves settling all outstanding premium payments along with accrued interest. Alternatively, policyholders can choose to convert the policy into a paid-up policy, which exempts them from further premium payments but reduces the assured sum.

In the event you encounter difficulty in paying your LIC premiums, it’s crucial to promptly reach out to LIC for guidance on the most suitable course of action. Following listed are some strategies to help prevent your LIC policy from lapsing:

• Establish an automatic direct debit to ensure premiums are deducted from your bank account without fail.
• Ensure your account maintains sufficient funds to cover premium payments.
• Keep a close eye on premium due dates.
• If you anticipate an inability to pay a premium, promptly contact LIC to discuss your situation.

How to revive a lapsed LIC insurance policy?

To reinstate a lapsed LIC policy, the policyholder must clear all overdue premiums along with accrued interest. Depending on the policy’s terms, a medical report might also be necessary. The interest rate on overdue premiums varies by policy but typically hovers around eight per cent every year.

The revival process for a lapsed LIC policy can be carried out either online or offline. The policyholder can either visit their nearest LIC office or get in touch with the LIC customer care helpline to initiate the revival process.

It’s important to note that not all lapsed LIC policies are eligible for revival. For instance, policies that have remained lapsed for over two years cannot be reinstated. Lapsed LIC policies can be reinstated by the insured through the following LIC revival programs:

Special revival scheme: LIC offers the special revival scheme as a solution for policyholders facing lapses in their policies. Under this scheme, policyholders can reinstate their policies by settling all overdue premiums, along with accrued interest, and a one-time revival charge. The revival charge is determined as the difference between the old and new premium rates. Additionally, policyholders have the option to spread the interest on overdue premiums across monthly installments.

This scheme applies exclusively to policies that have lapsed within a three-year window from the first unpaid premium date. Furthermore, a policy can only undergo revival once under the Special Revival Scheme.

Here are the steps to revive a lapsed LIC policy using the special revival scheme:

1. Submit a written request to LIC, along with the policy document, proof of identity and address, and a medical report if necessary.
2. LIC will calculate the required revival amount.
3. Make the specified payment to LIC.
4. LIC will then revive the policy and furnish a new policy document to the policyholder.

While the special revival scheme offers an opportunity to revive lapsed policies, policyholders should be aware that the revival cost can be substantial. It's crucial to thoroughly review the policy's terms and conditions before making a decision on revival.

Instalment revival scheme: LIC extends the instalment revival scheme to policyholders encountering lapses in their policies and facing challenges in making full payments for overdue premiums. Within this scheme, policyholders have the opportunity to restore their policies by settling the arrears of premiums through monthly installments.

The instalment revival scheme is applicable exclusively to policies that have lapsed within a five-year period from the initial unpaid premium date. Policyholders can choose to spread the revival process over a maximum of 36 months, with each month's payment amount determined by the total arrears of premiums and the selected repayment duration.

Here is a breakdown of the steps involved in reviving a lapsed LIC policy under the instalment revival scheme:

1. Submit a written request to LIC, accompanied by the policy document, proof of identity and address, and a medical report if necessary.
2. LIC will calculate the revival amount required.
3. Initiate the process by making the initial installment payment to LIC.
4. Receive a letter of intent from LIC, outlining the payable amount and the installment schedule.
5. Continue making monthly payments to LIC until the full amount is settled.
6. LIC will reinstate the policy once the entire amount has been paid.

The instalment revival scheme serves as a viable option for policyholders seeking to restore their lapsed policies, particularly when faced with financial constraints. It's essential to be aware that interest on the arrears of premiums will apply, and a thorough review of the policy's terms and conditions is recommended before deciding on revival.

Survival benefit cum revival scheme: LIC presents the survival benefit cum revival scheme to aid policyholders who find their money-back life insurance policies lapsed. This scheme allows policyholders to reestablish their policies by forfeiting the survival benefit.

The survival benefit, typically a lump sum payout upon policy term completion, is calculated based on a percentage of the total premiums paid by the policyholder. To revive a lapsed money-back life insurance policy through the survival benefit cum revival scheme, the policyholder must surrender their survival benefit and settle all overdue premiums, plus accrued interest. Depending on the policy's terms, a medical report may also be necessary.

This scheme applies solely to policies that have lapsed within a five-year window from the initial unpaid premium date, and it can be utilized for revival only once. Here are the steps involved in reviving a lapsed money-back life insurance policy under the survival benefit cum revival scheme:

1. Submit a written request to LIC, including the policy document, proof of identity and address, and a medical report if required.
2. LIC will calculate the revival amount due.
3. Surrender the survival benefit.
4. Make the initial installment payment to LIC.
5. Receive a letter of intent from LIC, specifying the payable amount and installment plan.
6. Continue with monthly payments to LIC until the entire amount is settled.
7. LIC will reinstate the policy once the full amount is paid.

The survival benefit cum revival scheme offers a viable option for policyholders wishing to revive their lapsed money-back life insurance policies without waiting for the policy term to conclude to receive the survival benefit. It's important to acknowledge that surrendering the survival benefit may lead to a financial loss, and careful consideration of the policy's terms and conditions is advisable before opting for revival.

Loan cum revival scheme: LIC introduces the loan cum revival scheme to assist policyholders facing policy lapses and who have previously borrowed against their policies. Under this scheme, policyholders have the opportunity to restore their policies by utilizing the loan amount to cover overdue premiums.

The loan cum revival scheme applies exclusively to policies that have lapsed within a five-year timeframe from the initial unpaid premium date, and it can be utilized for revival just once. Here are the steps involved in reviving a lapsed policy through the loan cum revival scheme:

1. Submit a written request to LIC, including the policy document, proof of identity and address, and a medical report if required.
2. LIC will calculate the revival amount necessary.
3. Utilize the loan amount to settle the outstanding premiums.
4. Be prepared to pay interest on the borrowed amount.
5. The remaining balance of the loan amount will be returned to the policyholder after adjusting it against the premiums and interest.

The loan cum revival scheme provides a valuable option for policyholders wishing to revive their lapsed policies but facing financial constraints. However, it's essential to be aware that repayment of the loan amount, along with interest, is required by LIC. Thoroughly reviewing the policy's terms and conditions is advisable before making the decision to proceed with revival.

Let insurance policies lapse can be concerning as it translates to putting to risk the future of your loved ones. Insurance is like a shield whose effectiveness and efficacy are realized only during death and disease. The focus should always be on buying the right life insurance policy and ensuring that it is not lapsed due to unpaid premiums or non-payment of premiums on time.