This article explains the various policy revival schemes of LIC and other insurance companies
There is some good news for the insured for reviving their lapsed insurance policies. Due to the recent financial crisis, leading to job losses, many policyholders have defaulted on payment of their renewal premiums, because of which, their policies have lapsed. Over nine million policies lapsed in 2009, and almost half the conventional policies that lapsed in the industry during the period were sold by Life Insurance Corporation (LIC) which controls over 65 percent of the Indian insurance market.
Revival of schemes
LIC and other private insurance players have introduced revival schemes, wherein a lapsed policy could be revived within five years of the last payment. However, these schemes need the holder to pay the entire pending premium at one go along with interest.
A large number of policies are lapsing due to the inability of holders to pay the due premium in a lump sum. The newly introduced instalment scheme and the special revival scheme launched last month are aimed at such policyholders.
These schemes are a good initiative, since it will allow all customers to revive their policies on easy terms. Revival of policies depends on the actual reasons behind a customer not paying his premiums.
Generally, if an investor stops paying premiums for five straight years, he loses the entire amount paid up to that point. The revival schemes will benefit these investors the most. Like the normal revival scheme of LIC, the instalment revival scheme, too, would be applicable on all policies within five years of the last unpaid amount. The special revival scheme, however, would be applicable on schemes where the last premium was paid not more than three years ago. Declaration of good health and medical reports, wherever necessary, would have to be submitted.
Types of revival
If the premium under a policy is not paid within the days of grace the policy lapses. Revival is a fresh contract wherein the insurer can impose fresh terms and conditions. A policy can be revived under the following types of revival:
Ordinary revival: If a revival of the policy is effected within six months from the due of first unpaid premium no personal statement regarding health is required and the policy is revived on collection of delayed premium plus interest. The rate of interest to be charged for such delayed premium will depend on the date of commencement of the policy.
Revival on non-medical basis: For revival of the policy on non-medical basis the amount to be revived should not exceed the prescribed limit for non-medical assurance taken by the life assured.
Revival on medical basis: If a policy cannot be revived under ordinary revival or revival on nonmedical basis it can be revived with medical requirements. The medical requirements will depend upon the amount to be revived
It is to be noted that if the policyholder has paid premiums for at least three full years and subsequently discontinued paying premiums, and in the event of death of the life assured within six months from the due date of the first unpaid premium, the policy money will be paid in full after deduction of the unpaid premiums, with interest up to date of the death.
If the policyholder has paid premiums for at least five full years and subsequently discontinued paying premiums and in the event of death of the life assured within 12 months from the due date of first unpaid premium, the policy money will be paid in full after deducting the unpaid premiums, with interest up to date of the death.
