Term Policy Premium Payments and Renewal Guidelines

A term policy necessitates that the policyholder make premium payments according to a selected schedule of annual, half-yearly, quarterly, or monthly payments. The premium is due on a specific date by which the payment must be made. Based on the payment made, the policy is renewed for the subsequent term. Below are critical points to note:

What Occurs If the Premium Is Not Paid by the Due Date?

The premium payments in a term policy must be fulfilled on due dates as outlined in the schedule for the renewal to be successful. However, if the policyholder does not meet the expiry date, an extension can be granted. Past this period, the policy may lapse.

What Does a Grace Period Mean in a Term Policy?

A grace period in a term policy is the additional time allowed to pay the premium if the due date is missed. For an annual, half-yearly, or quarterly premium payment schedule, the grace period extends for 30 days from the original due date. For a monthly payment schedule, it is 15 days.

What Occurs If You Default Even During the Grace Period?

A grace period provides extra time to pay the premium after the due date. If the policyholder cannot make the payment within this timeframe, they will face repercussions. In some instances, the premium may still be paid along with late fees or penalties. In the worst-case scenario, the policy may be cancelled.

What Happens If You Neglect to Renew the Term Policy on Time?

A term policy provides a straightforward life cover where the death benefit is available in exchange for premium payments. If the policy is not renewed on time, it is cancelled, and the life cover is rendered inactive. There will be no death benefit available, and any premiums that have already been paid will not be refunded. This is a significant loss, particularly for high-value policies such as a Rs 1 crore term plan, as the benefits would be forfeited.

What Does Revival of a Lapsed Term Policy Signify?

The revival of a lapsed policy refers to restoring the term policy to regain its benefits. It is the procedure through which the policy resumes operation even after a missed payment and cancellation. However, this is subject to the discretion of the respective insurance company based on its terms and conditions.

How Can a Lapsed Policy Be Revived?

Certain insurers permit the renewal of a lapsed policy. To accomplish this, several documents, such as health certificates and KYC proofs, must be submitted. Additionally, specific fees are required to revive a lapsed policy. This includes late penalties, interest accumulated during the default period, and the payment of any outstanding unpaid premiums. You may also encounter a new set of terms and conditions imposed by the insurer.

What Is the Revival Period in Life Insurance?

A revival period in life insurance signifies the timeframe permitted by the insurance provider to reinstate a policy that has lapsed. Generally, this timeframe lies between 3-5 years and differs among various insurers. The commencement of this period starts from the due date of the initial unpaid premium.

How to Prevent Missing Policy Renewals?

You can prevent missing premium due dates or resulting policy lapses by ensuring payment through the following methods:

• Establish a calendar for your premium payments and enable an alert.
• Set a standing order with your bank to automatically deduct premiums via ECS.
• Opt for auto-pay options using your ATM card or UPI.
• Select a policy that is conveniently affordable for you.