Wednesday, December 3, 2008

Don't Let your Insurance Policy Lapse

The markets are falling on their head. There is bad news all around. People are losing their jobs. Companies are shutting shops. So, what would one do to cover their finances? First thing that comes to mind is dip into your investments to get money. After all this was the day that you have been saving for...

But then there are certain investments that one makes with a goal in mind. It would be better if one doesn't touch those. Your insurance policy can be one such investment. If you have a ULIP (the type that gives better returns only if invested for long periods), you should keep it as is and better keep your premium going as well. 

For a ULIP less than 3 years old, your insurance will lapse as soon as you skip a premium. There is a grace period of 30 days, during which the premium continues though. If the grace period is over, the policy lapses and the insured no longer enjoys the insurance benefit.

For a policy older than 3 years though, it assumes a paid-up value. This means, the policy would remain in force even if the premium is not paid. The cost of insurance is deducted from the fund value and thus the policy continues as long as the fund value is sufficient enough to cover the expenses.

What should one do?

If your policy is less than 3 years old, continue your premium. You could change the mode from annual to monthly or reduce the sum assured in the plans which allow this such as Birla Sun life Platinum plus.

If the policy is already lapsed, insurer gives you up to 4 years to revive the same. However, later you revive, the more expensive it can get. You may also have to undergo medical tests. With in 6 months from the lapsation, all you have to do is to pay all the premiums and the policy is revived. But after 6 months, you will have to pay an interest amount (12-18% of the premium) as well as you may have to appear for a medical test.

So it is in your best interest to pay the premiums reguraly so that the policy as well as the cover continues.


All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.