Lapse
Just like a vehicle stops working when no fuel or proper maintenance is done, a Lapse occurs when you stop paying your premiums. It is a situation where you cannot enjoy the benefits of your policy.
So, what is a lapse in life insurance? To put it simply, it is a situation where the contract between you and the insurance company ends when you miss a premium payment.
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A lapse happens when you do not pay the premium by the end of the grace period. The duration after your premium payment date, during which you can still pay the premiums without losing the policy benefits, is called the grace period. Failure to pay the premiums during this period will lead to a lapse, which will lead to the termination of your life insurance policy.
No. A lapse is when the policy terminates due to non-payment of premiums. Cancellation is a voluntary action taken by the policyholder to end the policy.
The meaning of a policy lapse refers to the policy ending prematurely due to non-payment of premiums. On the other hand, an expired policy ends on its own because the policy term has been completed or the insured event (like maturity) has occurred.
Your life cover and all associated benefits (like bonuses) immediately stop. You will not be able to carry out a life insurance renewal as well, and your family will not receive financial protection in the event of your death.
The primary risk is leaving your family financially unprotected. You also lose all the premiums paid and may have to buy a new, more expensive policy at an older age.
The most common reason is the non-payment of premiums. This can occur due to financial hardship or simply forgetting the due date.
The simplest way to avoid a policy lapse is to opt for an auto-debit (ECS) mandate from your bank account to ensure premiums are paid automatically on time. You can also set up reminders for yourself to pay the premiums of your life insurance online.
Yes, through a process called 'revival' or 'reinstatement'. You must contact your insurer within a specific period from the date of lapse. The revival period allows you to hit the ‘reset’ button on your insurance policy and get the benefits back.
You need to submit a revival form, clear all the unpaid premiums with any interest or penalties, and may need to provide updated health documents in some cases.
In most cases, no. You will not get your money back. In the case of a policy with a paid-up value or a surrender value, you may get your money back after a lapse. It is best to read the policy documents for details specific to your plan.
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