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Life insurance plans are basically long term-term contracts that typically last for periods as long as 30 to 40 years. The life insurance policy remains active during the period of the policy as long as renewal premiums are paid within the specified payment due dates.
Well, it is quite normal that during the period of the life insurance policy, the policyholder might miss paying an insurance premium within the due date of the payment. This could be due to various reasons such as unavailability of funds, emergency expenditures, ill health, inaccessible payment modes, etc.
So, what are the consequences of missing the premium payment? Does your life insurance cover lapse? What about all the insurance premiums that you have paid till date towards your life insurance policy? Is there any chance where you can continue to enjoy the benefit of your policy? Thankfully, life insurance companies have taken this situation into consideration and the majority of the leading insurance companies offer you a grace period of around 30 or 31 days for making the life insurance renewal premium.
A grace period is basically the additional time period that is provided for the policyholder after the premium due date, during which the policyholder can make the premium payment while he/she can still enjoy the benefits of his/her life insurance plans. The duration of grace period based on the frequency of premium payment (i.e. yearly, half-yearly, monthly) as well as the type of life insurance covers the policyholder has chosen.
Please note that the duration of the grace period is typically 15 days for monthly premium payments but it is 30 days for longer payment options like annually or half-yearly. Majority of the life insurers send you a reminder for making the premium payment before the premium due date and they will subsequently inform the policyholder if the life insurance policy has entered into the grace period.
But the policyholder will run into the trouble if the grace period ends and he/she still has not made the premium payment. In such a case, the policy will lapse. That means, the insurance coverage ends and he/she might have to apply for a new life insurance policy even with high premium rates.
As said earlier, if you don’t make the premium payment within the grace period then your policy lapses. Then the insurance company may or may not allow you to pay back premiums or gives you the chance to reinstate the life insurance policy. In order to restart your insurance policy, you will need to pay your overdue bills including the interest. Well, it is still cheaper than purchasing a new life insurance cover based on your current health and age.
You can generally apply for reinstatement within 3-5 years of your insurance policy lapses. However, it is suggested to apply as soon as it is possible. If your policy lapses longer than a couple of months then you might have to prove that you are not a risky individual to insure for a company by just answering a few health questions or even taking another medical exam.
Mind it, if you die before reinstating your policy or replacing your lapsed insurance policy, your nominee would not get a sum assured.
In order to keep your life insurance policy intact, you need to stay organized to make on-time premium payments. And do not forget to follow the below-mentioned tips so as to not miss your insurance premium payment:
The Bottom Line
Life insurance monthly premium payments are required to keep your insurance policy active. Henceforth, it is best to make the premium payment when they are due in order to avoid a lapse in coverage or costly replacement of life insurance plans.