What Occurs When Your Life Insurance Expires?Posted by amrina alshaikh on August 31st, 2023 A life insurance plan is typically a long-term agreement. Its purpose is to protect against the risk of an early death for a chosen period, providing financial security for the beneficiaries of the insured person. You must pay the insurance company a premium to receive the coverage offered by the life insurance policy. Regarding premium payments, there are three usual choices available:
What if You Don't Pay the Premium on Time? If you miss a premium payment, the life insurance company offers a grace period, which is extra time to settle the unpaid premium. This grace period lasts for 15 days for monthly payments and 30 days for yearly, half-yearly, and quarterly payments. It starts from the date of the first missed premium and allows you to pay the overdue premium to keep the policy active. During this grace period, the insurance coverage remains valid based on the policy's terms. However, if the premium isn't paid during the grace period, the policy lapses. Lapse of Life Insurance Policies – What Does It Mean?A lapse of a life insurance policy means that the benefits provided by the plan cease. Lapse signifies that the coverage and benefits of a policy are no longer accessible. Moreover, any features or advantages of the policy cannot be utilized, including the right to make a claim. What Occurs After the Policy Lapses? If your policy lapses, you have the option to reinstate or revive it. Revival involves restarting the coverage and benefits in a lapsed insurance policy. Insurance companies generally permit a revival within three to five years (depending on the policy type) from the first unpaid premium's date. To revive the policy, you need to meet these conditions:
Non-Forfeiture Clause in Life Insurance Policies The non-forfeiture clause offers two benefits for a lapsed policy:
So, if you choose to discontinue a lapsed policy and surrender it, you'll receive the surrender value as per the policy's terms. Reviving a surrendered policy isn't possible, but you can revive a paid-up policy during the revival period. The Final Thought Preventing a policy lapse is crucial, as a lapse means you won't enjoy the full coverage and benefits of the life insurance policy. Timely premium payments are essential to keep the policy active. Nevertheless, if your policy does lapse due to unavoidable reasons, you have the chance to revive the coverage within the revival period. Reviving the policy restores its full benefits, allowing you to achieve the original purpose of purchasing the policy. It's important to understand what a lapse entails and what follows, so you can effectively manage your life insurance policy. Like it? Share it!More by this author |