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Life insurance policy is a unilateral agreement between the insurer and the insured which basically means that the obligation rests only on one party. In case of life insurance, the party over which the obligation rest is the insurer.
A life insurance policy can be compared to a motor insurance policy. In order to continue coverage, the insured party must continue to pay premiums that are outstanding. In case the policyholder is unable to make the payment of the life insurance premium the policy will eventually lapse and therefore the party would not be covered anymore.
What happens in case the policyholder misses the payment of their life insurance plan accidentally or is unable to make the payment of their premium on time? If you are looking for the answer to this question you have landed at the right place. In this thread, we will shed light on different possibilities when a policyholder misses their premium along with the options to consider.
Every insurance provider allows a grace period for making the Life insurance premium payment. Typically, the grace period of life insurance policies varies from 14 days to 30 days. In case the policyholder makes the premium payment within the policy period their policy will not lapse.
However, an important point to be kept in consideration while be holding on to the grace period is that the guidelines vary from company to company and one should refer to the fine print of the policy for details. If the policyholder passes away within the grace period they will still be covered and the provider will have to pay the death benefit to the nominees.
If the policyholder surpasses the grace period without making the payment of the life insurance premium the policy should ideally lapse. The option left in such a scenario is reinstatement. The policies for reinstatement again vary from provider to provider. Typically, most of the insurance providers allow policyholders to apply for reinstatement until a period of 5 years from the grace tenor.
The following things will be required for reinstatement-
Every insurance provider will require you to fill the reinstatement form, which is quite similar to the original application when you first applied for the policy.
Most of the insurance companies will enquire about your health status as the objective behind this is to analyze and assess any changes that may have occurred from the time of the original application.
The provision for medical examination varies from provider to provider similar to the points mentioned above. If the reinstatement application is submitted within a period of 90 days from the grace tenor most of the companies would not require a medical examination, some of the providers might give the insured an entire year before re medical examination.
In case you inform the insurer about any changes in lifestyle or health condition it is very likely that the medical examination will be conducted again irrespective of the time period. If your reinstatement application is accepted you will have to start repaying the life insurance premiums from the end of the grace period.
Later in life, you might not want your life insurance policy to continue. For instance, when policyholders get to know about cheaper policies, they tend to cancel the old ones and go for the new one. Or maybe the policyholder wants to discontinue the policy.
There are numerous ways to cancel a life insurance policy in UAE a simple way is to simply not make the payments of the premiums which eventually will result in lapsing of the policy. However, if the policyholder makes the payment of life insurance premium annually or half-yearly then, in that case, the policy needs to be canceled formally.
In order to cancel the life insurance policy formally the one needs to call the insurance provider and inform them that you want to discontinue the policy. You can inform the provider and request them to refund the unused premiums. In case you are three months into the payment of premium i.e. AED 1500 then you can receive a sum of AED 1000 back from the insurance provider. Formal cancellation of the policy is the ideal solution in case the policyholder wants to discontinue the policy.
In a Nutshell
In case the policyholder is unable to make the payments of the policy there are multiple scenarios that come into the picture. The most important thing that a policyholder can do in case they can miss on their life insurance payment is to inform their life insurance provider.
You can inform your insurance party and enquire about the various options that are available in case the life insurance premiums are missed. You can apply for reinstatement and canceling of the policy which will help you to counter issues during the strokes of uncertainties on the trail of life.