Lapsed life insurance policy: Should you renew it or opt for a new plan?
Lapsed life insurance policy – Should you renew it or opt for a new plan?
If you do not pay your life insurance premiums on time, including during the grace period, your life insurance policy lapses. Experts say renewing an insurance plan is as important as buying it, however, many policyholders fail to renew their insurance plans on time. Not renewing an insurance plan means not receiving any benefits upon the maturity of the policy. It also defeats the purpose of buying a life insurance policy.
While opting for an insurance cover, and while determining the premium amount numerous aspects are taken into consideration. Such as factors including age, gender, present health condition, lifestyle, and family medical record. The younger age group and those with no medical history of ailments and diseases are considered low-risk and pay low premiums. Hence, experts say, if a policy is not renewed and lapses, all the hard word, and research put behind getting the policy is lost. Having said that, you could also revive your policy, if your insurer allows so. Some companies also have special campaigns to revive lapsed policies.
Kamlesh Rao, MD, and CEO, Aditya Birla Sun Life Insurance, says “A life insurance cover, especially in times like these, is vital, hence, people want to be covered, and insured. Especially, people with financially dependent family, have liabilities or want to secure their future financial goals, must always remain protected.”
In the current state, if your financial protection is at risk with the lapse of the cover, you could get in touch with your life insurance company and check if you can revive your policy. A company usually allows policy revival during the reinstatement period, between 2-5 years, but this differs from policy to policy.
Having said that most people at this point get confused between renewing it or opting for a new insurance plan. Rao of Aditya Birla Sun Life says, “Reviving your old policy will help you retain the financial benefits offered by the existing cover. Moreover, revival normally happens at the older premium rate, and the bonuses accrued during your policy term will get restored.”
Additionally, in case you plan to purchase a new policy, experts say, policyholders should weigh the premium difference they will have to pay when compared with reviving their old policy. Note that buying a new cover usually costs more owing to the change in the insured’s age and health conditions.