Forgot to pay your premium? If you’re wondering what happens next, this guide can help you.
Life insurance is such a simple yet beneficial product, isn't it? You pay premiums, and in return, the insurance provider gives you a life cover.
And for as long as you pay your premiums promptly, the life insurance cover continues to remain valid.
But sometimes, a family emergency may crop up.
Or some urgent work at your office.
Or perhaps, an unexpected out-of-town business trip.
For these reasons or others, you may forget to pay your insurance premium on time.
In that case, what happens to your life insurance cover? Let’s find out.
Does your life insurance policy become invalid if you forget to pay your premium?
The short answer is no. Your life cover does not immediately become invalid if you forget to pay your premium. Every life insurance policy has a grace period. This grace period is generally 30 days long. Some policies, or some insurers, may offer a grace period of just 15 days.
So, in case you forget to pay your premium at some point, you can still do so during the grace period. If you complete your payment within that period, your life insurance cover will continue to remain in place.
Grace period: An example
Suppose you have purchased a life insurance policy that charges an annual premium of Rs. 50,000. Now, say your premium payment due date is June 1st each year. From the time you purchased your policy, you’ve been prompt with your payments.
However, say one year - 2021 - you forget to pay the premium on June 1st.
Your grace period then begins, and it lasts for 30 days - till June 30th. You can pay your premium at any time before that date, and your life cover will remain unaffected.
What happens if you do not pay the premium even during the grace period?
If you forget to pay your premium even during the grace period, your life insurance policy lapses. What this essentially means is that you will no longer be able to enjoy the benefits that the life cover offers.
So, picking up the previous example, if you do not pay your premium on or before June 30th, 2021, your life insurance policy will lapse.
Policy lapse vs. policy termination
A policy lapse, as you’ve seen in the previous section, is simply your policy’s benefits ceasing because you failed to pay the premium.
But what is a policy termination? Well, a policy termination occurs in any one of these scenarios.
Scenario 1: Death benefits paid outIf the policyholder passes away during the tenure of the life insurance plan, the sum assured and any other bonuses that may form a part of the death benefits are paid out to the nominee. After the payout is made, the policy is terminated.
Scenario 2: Maturity benefits paid outIf the policyholder survives the policy term, most life insurance plans (except term insurance policies) pay out maturity benefits to the policyholder. Again, after this payout is made, the policy is terminated.
Scenario 3: Surrender of the policyIn some cases, you may choose to surrender your life insurance policy. Upon surrender, life insurance policies will pay you the surrender value, if any. Then, the policy shall be terminated.
So, you now know that if you ever forget to pay your premium, you still have a grace period of 30 days you can rely on. However, if you really want to ensure that you never miss - or forget - a payment again, you can make use of any of these ideas.
- Set up an auto debit mandate.
- Make use of apps to set reminders.
- Consider single premium policies or policies with a short premium payment term.
See how there are so many ways to make sure you pay your premium promptly? With these tips and tricks, you can ensure that you continue to enjoy your life cover throughout the policy term.
Read next: 10 LIFE INSURANCE TERMS YOU NEED TO UNDERSTAND
Speaking of understanding insurance better, have you ever wondered what life insurance jargon meant? Why not get started by understanding 10 basic life insurance terms that everyone needs to know. Check out the details on our blog.
AFRAID YOU’LL FORGET YOUR PREMIUM DUE DATE? REDUCE THE CHANCES OF POLICY LAPSE BY PAYING PREMIUMS FOR JUST A SHORT PERIOD
With the ABSLI Vision LifeIncome Plan UIN: 109N079V05), you can choose from convenient and short premium payment terms.
The best part? This plan gives you the benefit of additional income all through your life.
ABSLI Vision LifeIncome Plan (UIN: 109N079V05) is a traditional participating endowment plan. ADV/7/21-22/531
ABSLI Life Shield Plan
A term insurance plan that offers you the flexibility of plan options suitable for your family's non- negotiable goals and ensure they need not compromise on their lifestyle. UIN: 109N109V06
- Choice of 8 plan options
- Cover your spouse under the same policy
- Longer Life cover till age 85
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