Lapsing of a term Insurance Policy can have serious aftermaths on your total insurance portfolio. This can also create a financial imbalance in your financial plan leading to heavy cost being paid for financial security. We all know that a term insurance plan bought at an early age can be quite beneficial and cheaper but if at an older age the policy lapses you always need to pay an extra cost for the same amount of cover and might not even get all the benefits of the cover as you have a grown older.
When we say your term Insurance Policy has lapsed, we should first understand what it means. When you enter into insurance agreement with an insurer, the promise that you make while buying a policy is that you would pay all the premiums on time. Paying all the premiums on time depends on the mode of premium payment one has shown. It can yearly, quarterly and even monthly. In either of the modes of payment it is always a fixed date on which the premium need to be paid. Other than the specific date your insurer always gives you a grace period generally for a period of one month post the premium paying date. If the policyholder fails to pay the premium of the term policy within this restricted time horizon, the policy is deemed to be inactive or lapsed. Buy Best Life Insurance Policy India With the policy being in the lapsed state all your benefits stands on hold. You can’t make a claim on the policy.
So from the above description you can easily understand how a lapsed policy can effect. Previously since the term insurance was not online you where suppose to deposit the money through a cheque and plus if the premium payment mode is yearly there are always chances that you forget the date. But with the advent of technology the process has become bit easier. Now your insurer is always proactive in sending you sms notification a month before your policy is due and now you also have online payment options to pay premium. So the offline hassle has gone away but still remembering renewal date is always a problem. To get away with this problem you can possibly set auto debit mandate with your bank account or credit card so that even if you forget to remember the renewal date, the money can be automatically debited from your debit or credit card and the premium get paid.
But still if situation of term insurance policy lapse occurs, Compare term insurance plans online insurers have now started offering reinstatement options. You can opt for the reinstatement option generally within one to two months posts the policy inactivation date. The insurer in this case would charge you the premium with interest on the lapsed period and most of the times a processing fee is also charge.
So it is always advised that don’t miss your renewal and try following smarter ways to avoid the same.