Make the most of special campaigns to revive lapsed insurance policies

When insurance companies run them, the penalty is waived and you do not have to undergo a medical test

If you do not pay your life insurance premiums on time, or within the grace period, your policy lapses. Life insurance companies run special campaigns from time to time to revive such policies. During these campaigns, they offer concessions and waive late fee. Customers whose policies have lapsed should make the most of these occasions.

Currently, Life Insurance Corporation of India (LIC) is running such a campaign. It will run until October 15, 2018. "During these campaigns, policyholders can revive their lapsed policies by just paying the outstanding premium. The late-payment fee gets waived," says Rakesh Wadhwa, chief marketing officer, Future Generali India Life Insurance.

Under these special revival schemes, the original date of lapsation is shifted forward by a maximum of two years. Policyholders need to pay the difference between the old and the new premium, along with the interest. A policy can be revived only once under such a scheme during its entire term. You cannot avail of such a scheme if the policy has lapsed for less than six months or more than three years.

According to Amit Agarwal, director, Ideal Insurance Brokers, "If a customer revives his policy in normal times, he has to pay the entire interest amount and also a late payment fee, if applicable. He also has to undergo a fresh medical test to ascertain his current health status." During special campaigns, companies waive late payment fee, penalties, and the requirement for a medical checkup. In its current campaign, LIC is offering a concession in its late fee (see table).

Customers, however, need to fulfil a few conditions to revive their lapsed policies. If it has been less than six months since the policy lapsed, policyholders can revive it online, just by giving a declaration of good health. But if it has been more than six months, then insurers normally insist on a fresh medical checkup. All unpaid premiums have to be paid, along with interest charges.

There are few options for paying the premium that is due. Under ordinary revival, all the premiums along with interest charges can be paid in a lump sum. Insurers also offer an instalment revival scheme, under which they allow the policyholder to make monthly, quarterly, half yearly and yearly payments of the amount due. Policyholders also have the option to take a policy loan.