Ahead of its mega IPO, the state insurer is beckoning policyholders to revive their lapsed policies. The policyholders can revive their lapsed policies until March 25. Several insured customers have a query whether they should go for this. Well, it is a good opportunity!.
But whether you make use of the policy, first understand what does it exactly mean? An insurance policy becomes inactive when you don’t pay its insurance premium but it doesn’t lapse. The insurer gives a grace period to reactive an inactive policy.
The policyholders have the option of paying insurance premium in monthly, quarterly, half yearly or annual instalments. In case of monthly payment, the insurers give 15 days of grace period after the last date of payment of premium and for quarterly, half yearly and annual payments, the grace period is 30 days.
However, once the grace period ends, the policy stands to lapse. And post this, it can be reactivated within a limited time period prescribed by the insurance regulator IRDAI (Insurance Regulatory and Development Authority of India).
For policies issued before December 2019, the maximum period for revival of a lapsed policy is two years, whereas the policies issued after December 2019, the time period is five years.
Revival of policy
From time to time, insurers allow policy holders 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.
However, the only tricky part lies in the fact that in case of medical insurance, the insurer can ask the customer to go for a fresh medical check-up, especially when a lot of time has gone by.
Naval Goel, founder and chief executive officer of PolicyX.com was quoted by Business Standard as saying: “If the policy is revived within 30 days to six months of lapsing, the insured needs to just give a good health declaration. But if the policy is being revived after two-three years, the insured could be asked to undergo a fresh medical check-up.”
LIC's concession on revival of lapsed policies
|Up to ₹one lakh||20%||₹2,000|
|Over ₹3 lakh||30%||₹3,000|
So, one could choose the option of revival of existing — although lapsed — policy instead of taking a new policy. But in case of term insurance, experts advise that one should ideally choose a new policy instead of paying premium for the previous years.