Yes!! Your insurance agent has successfully convinced you to buy a policy. Since you wish to save tax, you invested in the same. There comes up an unexpected problem of job loss, and now you find it difficult to pay the premium. The result is – “Policy Lapse.”
All of us are aware of the fact that if we fail to pay the premium the policy will lapse. For an insurance policy to be beneficial to you in the future, it is crucial that you pay all the premiums on or before the due date. If the policy lapses, you or your dependents will not be able to enjoy the benefits of the policy. Hence, it is important that your policy is in force so that your dependents make the most of its benefits.
Why does an insurance policy lapse?
The primary reason for a policy to lapse is non-payment of premiums. Insurance companies ensure that they send a reminder well in advance so people do not forget, and miss on the same.
Apart from making payments on time, it is also important that people keep investment and insurance separately. It offers a three-fold benefit.
- Firstly, if you wish to cancel the policy, you will not have to incur any loss. Also, it makes easy tracking of your investment.
- Apart from this, if you are in need of money, then you can redeem the policy whenever needed.
- Last, of all, wholesome investment plans prove to be cheaper and simpler.
However, if the policy has lapsed, then how will you revive the same? The following will help:
- You will have to get in touch with the insurer for policy renewal documentation.
- Ensure that all unpaid premiums from the last paid premium are cleared.
- Additional penalties like accumulated interest will be charged to renew the policy.
How to prevent policy lapse?
When a policy lapses, it not only brings in the additional cost of renewal but also abandons the life cover protection that it offers. The following will prove to be helpful so that you are not left high and dry.
- If you are not confident of remembering the payment date, then you can place standing orders with your back to deduct a stipulated amount from your account and make payment to the insurance company on your behalf.
- Another option is you can opt for credit card automatic pay option wherein the premium will be deducted from your card.
- Almost all insurance companies send reminders through emails or SMS alerts. Ensure that you update any changes with reference to your email address and phone numbers so that you do not miss on these reminders.
- Keep a note of the grace period that is offered so that if you have missed the payment on the due date, then you can always pay before the grace period is over.
A few preventive measures will help a lot!!