Skip to main content

Insurance Premium Payment

Missing the premium payment date does not mean you have to cancel your insurance policy. Check out its status with your agent and get it revived

OPTING for the right insurance cover is like taking your first step towards financial planning. But if you want to keep this security cover intact then you need to be financially disciplined and make those timely payments towards the premium amount. Many times because of sheer negligence or unforeseen circumstances, you miss upon making the payments on time. And when you find those bills, reminders stacked in one corner of the house, you are not sure whether to make a call to the company and revive your policy or simply let it go. Well, if you have been deliberating the same, here is a lowdown on how you can revive your policy.

THE PROCESS

There is a misconception that once you miss your due date for paying premium, the insurance company cancels the policy. It is advisable that before you decide to forego your policy, you should check out with your agent or the insurance company what’s the status of your policy. All insurance companies give a grace period of 30 days after the due date.

Nonetheless, even then if you are not able to utilise this grace period, it doesn’t mean that it’s all over. You can revive the policy till six months from the due date (including grace period) is over. You will be required to pay interest on outstanding premium amount as penalty. The interest, in our case, is 10.33% per annum or higher depending upon the policy that you hold and this vary from company to company and policy to policy. Any policy can be revived during the life time of the life assured, but before the date of expiry of policy term. You need to submit proof of continued insurability to the satisfaction of the insurance company and make the requisite payments of all the arrears of premium together with interest to revive your policy.

OLD V/S NEW

If you believe that reviving the old policy is not a good idea, then you are wrong. Financial planners believe that under no circumstances, you should discontinue the old policy and apply for a newer one. A person who defaults on a policy payment is generally in financial lurch. You need to take into consideration age factor, since you bought your old policy at a young age so the benefits acrrued till date will go away if you take a new policy. Same is the case with ULIPs where the commission charges are higher in the first few years and lesser amount is invested.

This theory doesn’t holds true if the policy has been in a state of lapse for over five years, reviving may not be the best option. “If a policyholder wants to revive a policy after five years, we suggest that he take up a new policy, since the fine on premium may be very high by that time.

In case of a pure term policy, if the premiums are not paid within due date and the grace period of the policy lapses, then in case of a death claim nothing is payable to the nominee of the policyholder. But if you hold a unit-linked policy, ULIP, the rules are different. In ULIPs, a portion of your premium is deducted as a payment towards your life cover or sum assured, a part of it is used for administrative charges and the rest is put into your fund account. In case of death during the term, the higher of sum assured and fund value is paid out. If premiums are paid for less than three full years, the risk cover will cease immediately at the end of the grace period. However, applicable charges are recovered (except mortality charges) from the fund till the end of the revival period. But if the premiums are paid for at least for three full years — the risk cover will continue till the end of the revival period and all applicable charges will be recovered from the fund.

TAKE THAT BENEFIT

In case of conventional polices like endowment, money back, and whole life policies, if the payment of premium ceases after three years the policy automatically becomes a paid-up policy and acquires a paid value, wherein the sum assured is reduced proportionately and the bonuses declared till date. Such reduced paid-up policy is not entitled to participate in the bonus declared thereafter but the bonuses already declared on the policy will remain attach, provided the policy is converted in to a paid-up policy after the premiums are paid for five years. Therefore if the policy acquires a paid up value in case of death or at maturity the paid value is paid to the policyholder.

However, in ULIPs as long as there is sufficient fund in your ULIP account to sustain the cost of insurance, the policy continues and in case of death the fund value or the sum assured, which ever is higher, it is paid to the nominee of the policyholder. Hence, it is in your interest that even if you’ve not been able to make the payments on time, you should check with your insurance company about the benefits that you still can avail.

CHECK IT OUT

All insurance companies give a grace period of 30 days after the due date

Any policy can be revived during the life time of the policy assured, but before the date of expiry of policy term

If the premiums are paid at least for three full years — the risk cover will continue till the end of the revival period

If a policyholder wants to revive a policy after five years, he would be better off, taking a new policy, since the fine on premium may be very high by that time

Popular posts from this blog

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now