Did you know that recently insurers have rolled out a campaign for all the policyholders that they can revive their insurance policy?
This change has been made to encourage people to continue the risk covers in this environment, experiencing a change in dynamics and becoming risky. The insurers usually allow the policyholders to revive the policy up to two years longer from the date of the premium’s non-payment, which is paid last. The revival of a lapsed policy is possible now. The lapsed policy revival is a smart move, but when does it make sense?
Here is a guide to help you understand the answers:
When to Revive Life Insurance Policy?
1. Renew the contract during the campaign by the insurer is best:
Having a life cover, especially in these times, is inevitable. Any individual who has financial dependents and liabilities must always remain covered. The financial protection of a person is put at risk if the cover lapses. It is prudent for an individual to check if her policy is active and consider reviving the same if it has lapsed.
One should know that a lapsed policy can be reinstated only during a revival period. This period is not available indefinitely, usually anywhere between 2-5 Years, and it's almost the same with every Insurance Company. During this revival period, in case of any mishappening or eventuality, claims are not admissible.
This will help you in retaining the financial benefits. The insurer company organizes policy revival campaigns and revises your lapsed policy so that you can save on penalty charges or medical check-ups that may be applicable. If you decide to buy a new cover, you should weigh the difference in premium between the old policy and the new policy. The system you will buy might cost you more because of the increase in age and change in health conditions. The revival of a life insurance policy always works best at the earlier premium.
2. Revive it if you have paid premiums for several years:
When you have a long-term endowment policy, then you would have paid the premiums for several years. In such a scenario, it is wise to revive a lapsed policy.
Until the maturity period, you must pay regular premiums to keep the system valid and active. By doing so, you will be benefited as your overall investment return will increase. If you do not revive your policy, then only surrendered value is given to you. A policy generally acquires any surrender value only after 3 years of its premium payment. The value which you receive as surrendered value is merely a fraction of the premium you pay. The results in the erosion of your capital. The guidelines of the product state that the proportion of premiums of the surrendered value. This proportion increases with the number of years you maintain a policy. In case you have paid premiums for more than a few years, you must revive your lapsed policy and pay for some more years to protect your capital.
Following is a table which shows the surrender value as a percentage of premiums paid & this percentage can change from company to company & depends on factors like policy type etc.-
|Time of Surrender||% of the Premium Paid – First Year Premium|
|After 3 years||30% of premium paid|
|After 5 years up to 8 years||50% of premium paid|
|After 8 years||65% of premium paid|
|Last 2 years to policy maturity||90% of premium paid|
Often your insurer will run campaigns for reviving the lapsed policies. Keep a lookout for such campaigns because the penalties on the lapsed policies are waived off. You may be asked for a good health declaration before getting the approval for revival, but this will be a significant opportunity for you.
3. Instead of buying a new policy, continue with the old one
In case of unforeseen circumstances, it is wise to have an active policy. A lapsed insurance policy can be a case when you fail to pay premiums on time. You can reinstate a lapsed policy. At RenewBuy, we advocate that our customers keep their policies active to provide their families financial stability. There is a revival period after the policy has lapsed. We insist that you reinstate your policy in that period which is limited. You can browse through various policies at RenewBuy and select the one which suits your needs. We offer transparent terms and conditions and competitive prices. You can also revive your policy with use. Depending on the type of policy you take, the revival period is decided around two to five years. However, the claims are not allowed during the revival period. You and your family will not be covered during this period. It would help if you revived your policy at the earliest to avoid the tedious revival process and higher late fee charges. You might have to go through medical tests again if you delay reviving your policy in time. With increasing age, the premium increases; hence, you must revive your lapsed insurance policy instead of buying a new one.
4. Does your plan cover the pre-existing conditions?
The purpose of investing in a life insurance policy is to provide financial support in the absence of the earning member. If you have a lapsed insurance policy, that means the sum assured is no more available for you. It would help if you focused on restoring it immediately. So, check for the available policies first and then browse at RenewBuy to get a cheaper policy with all the pre-existing conditions covered. If you get a better option, go for it. It is advantageous to revive a lapsed insurance policy because the premium for a new policy will increase with your age. Otherwise, the rates for term insurance policy remain the same throughout the tenure.
Therefore, it is wise to revive your term life insurance to support your family and continue it instead of buying a new policy. Purchasing a new policy will be expensive, and it might not even cover pre-existing medical conditions. Hence revives the lapsed policy in the given duration.