Revive lapsed policies in special campaigns

Insurers waive penalty and there is no medical test

Life Insurance Corporation (LIC) recently started a special campaign to revive policies that have lapsed. This will help policyholders who were unable to pay premiums on time or during the grace period.

Policies lapsing is common in the insurance sector. Experts say this happens primarily because people buy policies at the end of a financial year to get tax benefits under Section 80C of the Income-Tax Act. However, they do not continue to pay premiums. Some insurance players have a high lapse ratio due to this.

Consequently, life insurance companies run special campaigns to revive lapsed policies. During these campaigns, they offer concessions and waive late fees. Customers whose policies have lapsed should make the most of these occasions.

LIC’s current campaign will run till October 15. “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 revival schemes, the original date of lapsing is shifted forward by a maximum of two years. Policyholders need to pay the difference between the old and the new premium. 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 premium and a late payment fee, if applicable. He also has to undergo a fresh medical test to ascertain his health status.” During special campaigns, companies partially or fully waive late payment fees and the requirement for a medical checkup. In its current campaign, LIC is offering a concession in its late fee. Under this special revival scheme, if the premium amount due under your policy is less than ~100,000, the concession on your late payment fees will be 20 per cent or a maximum of ~1,500. For instance, if your due premium is ~80,000 and you are charged ~10,000 as late payment fee, you will be allowed a concession of ~1,500 only on ~10,000 and not ~2,000 ( see table).

Customers, however, need to fulfil some conditions to revive their lapsed policies. A lapsed policy can be revived within a period starting from the time the policy lapsed. If it is less than six months since the policy lapsed, policyholders can revive it online just by giving a declaration of good health. Depending on age and the policy amount, a declaration of good health is required to be submitted. But if it has been more than six months, insurers normally insist on a fresh medical check-up. To revive a lapsed policy, all unpaid premiums have to be paid, along

with late payment charges.

There are a few other options for reviving your lapsed policy. Under ordinary revival, all the due premiums, along with late payment charges, can be paid 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. The rest of the due premium needs to be paid by the policyholder within two years in equal instalments, along with the regular premium in accordance with the tenure of the policy. Policyholders also have the option to revive a policy by taking a policy loan.