scorecardresearchDeadline for LIC’s policyholders to revive lapsed policies to end soon

Deadline for LIC’s policyholders to revive lapsed policies to end soon

Updated: 15 Mar 2022, 03:59 PM IST
TL;DR.

LIC is running a special campaign to revive the lapsed policies by offering policyholders an option to pay concessional late fees

The maximum concession limit is  <span class='webrupee'>₹</span>3,000 in cases where outstanding premium to the state insurer is over  <span class='webrupee'>₹</span>3 lakh. Photo: Reuters

The maximum concession limit is 3,000 in cases where outstanding premium to the state insurer is over 3 lakh. Photo: Reuters

The Life Insurance Corporation (LIC) of India is currently running a special campaign until March 25 for its policyholders to help them revive the policies which have lapsed on account of non-payment of premium. Let us suppose, Mr Ajay Vohra bought an insurance policy in 2014. He paid the premium on time for six years but during for past two years, he discontinued the payment for some personal reasons.

In effect, the policy lapsed and now, he can’t avail its benefits or seek a claim at the time of policy’s maturity. People like Ajay now have an option of paying the outstanding premiums to revive the lapsed policy. But there is a catch. He must pay the balance premium as well as the late fees. The only concession he can avail is on the late fees up to a maximum of 30 percent or 3,000 whichever is higher.

Here we try to uncover  the nuances of inactive insurance policy.  An insurance policy tends to get inactive once you don’t pay its premium but as a matter of fact, it doesn’t lapse. This is because the insurer gives a grace period to policyholder to help them reactive the inactive policy.

ALSO READ: LIC policy revival plan: Things you should know!

As we know, the policyholders can pay insurance premium in pre-defined timely intervals: monthly, quarterly, half yearly or annual. In case of monthly payment, the insurance company gives 15 days of grace period after the last date of payment of premium. The grace period increases to 30 days for quarterly, half yearly and annual payments.

It is worth noting that once the grace period ends, the policy stands to lapse. Following this, it can be reactivated within a limited time period prescribed by the insurance regulator IRDAI (Insurance Regulatory and Development Authority of India).

Maximum period allowed

For insurance policies that were issued prior to December 2019, the maximum period for the revival of a lapsed policy is two years, whereas the policies issued after December 2019, the time period is five years.

From time to time, insurers give policy holders an option to revive their policies by waiving off penalties for late payment of premium.

So, if you have made up your mind to revive the lapsed policy, you must pay the outstanding premium from the date of lapse of policy till the date of revival along with interest on it plus tax and cess due on it.

Concession in late fees for eligible policies

Premium Discount (%)       Maximum limit (Rs) 
Up to one lakh             20           2,000
Between 1-3 lakh        252,500
Above 3 lakh 30           3,000

 

It must be noted that the revival scheme is not applicable for high-risk policies such as term assurance, multiple risk policies, etc. Also, the policies can be revived within five years from the date of first unpaid premium.

The only bummer is that the insurer can ask the policy holder to go for a fresh medical check-up in case of medical insurance, especially when a lot of time has gone by.

“If the policy is being revived after two-three years, the insured could be asked to undergo a fresh medical check-up,” says Naval Goel, founder and chief executive officer of PolicyX.com.

In other news, the Department for Promotion of Industry and Internal Trade (DPIIT) notified a government decision to allow 20 percent foreign direct investment (FDI) in IPO-bound LIC.

 

First Published: 15 Mar 2022, 03:59 PM IST