What happens when life insurance policy lapses?
Life insurance premiums are a long-term commitment made to ensure financial stability and comfortable life for your loved ones. Policyholders sometimes tend to forget to pay the premium amount, which can result in a policy lapse. People also depend on their insurance agents to get notified about the premium date. Such dependence can cause future risk because insurance agents usually have a lot of clients on their plates.
While looking for the best life insurance policy, make sure to acquaint yourself with the lapse period. We have compiled a few things you can do in case you forgot to pay the premium once.
Check the grace period
Every insurance company allows for a grace period under which a policyholder can pay the premium amount without having the policy lapsed. The grace period can be anywhere between 2-5 years. If the policyholder dies during the grace period, then the beneficiary is still eligible for a claim. Beneficiaries must remember to contact the insurance company because they are not aware of the policyholder’s demise. Grace period is an opportunity to get your insurance cover back again.
What if the policy lapses and the policyholder is not able to pay a premium even before the grace period? In such circumstances, the policy is bound to fall. However, insurance companies with the best whole life insurance plan have the provision for reinstatement. The policyholder needs to write an application for the reinstatement of his/her policy cover. Certain companies also include a revival form to streamline the process. To understand the entire revival process, it is important to visit their official branch or call their customer support department. Reinstatement will result in new document registration along with new terms and conditions.
The company shall charge a due payment for all the premiums gone by. Certain companies also charge extra penalties for delayed payment. A full-fledged medical examination can also be on the cards. This is done because the grace period is long enough for a policyholder to catch a long-term illness. In such circumstances, the policy is bound to be a loss for the insurance company. Sound health is mandatory to get the existing policy renovated under new terms and conditions.
Why is it important to get life insurance?
As pessimistic as it sounds, life insurance has been the reason for the stability that millions of families enjoy after the departure of their loved ones. Ensuring a sound future for the needs of your family is crucial. Disciplined and time-bound savings can help realize your aspirations and dreams. These savings can also support the well-being and higher education of your children. Your spouse is left in a better position to make financial decisions. Insurance premiums also enjoy tax-free deductions and one is backed legally. Policy lapses severely create issues in the policy period and can hinder your beneficiary’s chance to claim.
Currently, people with the best insurance plans suffer from inadequate information that reaches them through illegitimate internet websites. The best way forward is to keep in touch with the insurance company and read all the documents thoroughly.