Renewing Your Lapsed Term Life Insurance Policy In India

Meet Rajesh, a 40-year-old marketing professional working in Mumbai. Due to work and family commitments, being a marketing person, Rajesh was always on his toes. Five years ago, Rajesh bought a renewable term life insurance policy to protect his family's financial future. However, during one very busy session at work, Rajesh forgot to pay for a premium instalment. Time passed by, and one morning, Rajesh found a letter dumped on his table, which was the intimation of his policy being lapsed. With those feelings of panic and not knowing the next move, Rajesh thought about whether a new policy had to be purchased or if the policy could be revived.
Rajesh isn't the only person in this scenario. Demands in life usually let us overlook certain significant and vital daily operations; one of those could turn out to be the timely payment of insurance premiums. If your renewable term life insurance has lapsed, it may seem way more than you think you can handle, but in truth, it is not the very end of the road. Knowing why your policy can lapse and how to revive it will keep your financial safety net intact.
In this article, we take you through the causes of a term policy lapse and the pros and cons of reviving a lapsed policy versus buying a new one, followed by an account of the detailed steps to reinstate a lapsed term policy in India.

What Causes The Lapse Of Term Life Insurance?

The term insurance policy can be voided if you neglect to make the premium payment on the due date and miss the grace period as well. The grace period is usually 15 days in case of monthly payments and about 30 days in other cases. It's like a little buffer zone that enables you to catch up on missed premium payments without losing your coverage.
If you don't make the payment within this grace period, your policy will unfortunately end. This means you lose the coverage, and the insurer isn't required to pay any benefits. That's why it's really important to pay premiums promptly and be clear about the terms and conditions involved with your term life insurance policy. By doing that, you will avoid lapses and ensure that your coverage is not disrupted.

Should You Renew A Lapsed Term Life Insurance Policy Or Buy A New Plan?

Revival of a lapsed policy usually incurs extra costs beyond the unpaid premium, so that's something you'll want to consider carefully. On the other hand, if you choose to purchase a new policy, you may be charged higher premiums because the original policy you purchased was at a younger age. Now, with years gone by, the new premium rates are likely to be on the higher side due to your age factor. Nevertheless, good coverage does not need to become very expensive if one shops wisely and, more importantly, online. A comparison of all the available insurance plans would really help make sure that the most reasonable deal is procured.
Looking at all these factors, you may find that the renewal of the lapsed policy often makes sense in certain cases while buying a new policy at other times.
Reviving it often makes more sense when your old policy lapsed just recently, but you bought it some time back. In these cases, the premium difference may become too large to ignore between the lapsed policy and a new buy. On the other hand, if you have recently purchased the old policy and have not paid a lot of premiums, acquiring a new policy might be better since the cost of the revival of the old policy might offset the continuance benefits.
Of course, there are pros and cons in both cases. For example, if you decide to revive your old policy, easier reinstatement procedures have been introduced by most insurance companies. This may turn out to be quicker and with fewer hassles than applying for a new policy. But if you buy a new policy, you could get better coverage suited to your changed financial and personal profile. Moreover, you are likely to benefit from new features or riders not available under the old policy.
The decision whether to revive an old policy or opt for buying a new one certainly depends upon your individual situation. And though there is no better approach other than ensuring that your policy remains active and premiums continue to get paid. If your policy indeed lapses, then getting yourself covered at the earliest again is quite critical for you, be it by reviving your old policy or buying a new one, as the case may be.

How To Renew A Lapsed Term Life Insurance Policy In India?

In case you miss the premium payment for renewal not only past the due date but also through the grace period approved by the insurance company, then a life insurance policy is termed lapsed. However, an opportunity does exist when you can bring your lapsed policy back to life, meaning you would be on a clear path to reinstate the term policy and regain benefits during the revival period.
The revival period is the timeframe given by an insurer for which you may reactivate a cancelled policy. This period may range from 2, 3, or even 5 years from the date of the first missed premium, though it varies from one insurer to another. Take note that once such a revival period is over, you cannot reactivate the policy, even if you are willing to pay all outstanding premiums.
Here's the process to reinstate your policy:

Raise A Request

The revival procedures may differ across insurers. You are best advised to contact your insurer's customer service or visit their branch office to inform them that you would like to renew the lapsed policy within the permitted revival period. When you do this, ensure that you have all of your details handy, like policy no., lapse date of the policy, etc., for the initiation of the revival process.

Know The T&Cs

They'll give you all the necessary information and forms to kick off the revival process. Make sure you carefully review the terms and conditions for reviving your policy. You can also find details about the process in your policy document. It's important to understand any additional requirements, such as undergoing a medical examination, submitting health declarations, or paying any applicable penalties. Some insurers might even ask you to fill out a separate revival form or proposal form.

Make Payment

You'll need to pay all the unpaid premiums along with any applicable interest and revival charges. The insurer will let you know the total amount due. Make sure to settle this payment within the stipulated time to avoid any further complications. It's crucial to stay on top of these details so the process goes smoothly.

Undergo A Medical Examination

The insurer may even ask you to undergo a medical check-up, especially depending on your age. This helps them reassess your health status and risk profile before reinstating the policy. If you've developed a new disease or medical condition, the insurer might take a few different actions. They could charge additional premiums and impose new terms and conditions before re-issuing the policy. In some cases, they might not accept your proposal at all.

Await Confirmation

After the submission of all the documents required and the payment is made, it shall be endorsed to the insurance company for confirmation. They will check through your application, your health status, and the payment details before reinstating your policy. In case of a successful revival, the insurer will issue a confirmation letter along with the reinstatement of the policy document. Keep these safe with you for future reference. It's nice to have your policy back on track, knowing that you are covered again. Right?

Important Things To Remember When Renewing A Lapsed Term Life Insurance Policy In India

Here are some key things to keep an eye on while renewing a lapsed term life insurance policy in India -

Set Automatic Payment

When you're signing up for renewable term life insurance, consider choosing the e-SI option (electronic standing instruction). This ensures that there are no delays in sending your premiums to the insurer, making everything smooth and hassle-free.

Know The Revival Period

Also, remember that there's a revival period in case your policy does lapse. Now, here is the catch: this window is not open forever. It usually will be anywhere from 2 to 5 years, so be sure to act within that time frame if looking to reinstate a policy.

Beware Of Other Costs

Restoration of a lapsed policy is not merely a question of paying the missed premiums. There are other costs to consider, too, like the interest on those outstanding payments and any revival charges that might apply. Plus, if it's been more than six months since your renewable term life insurance policy lapsed, brace yourself for potentially needing fresh medical tests and paperwork. It's like almost starting from scratch.

Watch Out For Loading

But here's the kicker - if your renewable term life insurance policy has lapsed longer, then the tougher it can be to revive and pricier it can get. There may be fines, and in the worst-case scenario, where your health has taken a turn for the difference, the insurer might just charge you more or deny reinstating your policy at all.

Consider New Renewable Term Life Insurance Policy

That said, sometimes it might make more sense to explore getting a brand-new renewable term life insurance policy instead. It gives you a chance to review your needs again, adjusting the coverage where you are now. It is very important to pay premiums on time to avoid disruption in renewable term life insurance coverage for you and your family. Don't worry too much if either your insurer doesn't offer e-SI or you missed setting it initially. You can still set up standing instructions afterwards. Just reach out to your insurer or bank to get it sorted.

Let’s Sum It Up!

Deciding whether to renew a lapsed term life insurance policy in India is all about finding the right balance. Reviving your old policy can feel reassuring with its familiarity and potential cost savings, but it's important to factor in the additional expenses and possible new conditions, especially if your health has changed. On the flip side, opting for a new policy allows you to tailor coverage to your current needs, though it might mean higher premiums due to age. Ultimately, whatever path you choose, keeping up with your premium payments and understanding the fine print of your renewable term life insurance policy is key to ensuring continuous protection for yourself and your family.