How Can An Insurance Policy Be Revived After It Lapses?

I bought a 10-year traditional insurance policy in 2015. I paid the premium for the first five years but was not able to pay for the last two years. Can I start paying the premium now? Has the policy lapsed? What happens if I don’t pay premiums on time in the future?

—Name withheld on request

Insurance companies provide a grace period of up to 30 days from the policy renewal date to pay the outstanding premium. Beyond this, if the premium is unpaid, the policy is considered to have lapsed.

However, lapsed policies can be revived. A policy can be revived by paying the past premiums, and additional charges as levied by the insurer.

Often, insurers come up with special schemes or campaigns to revive lapsed policies. In such schemes, they would typically waive any penalties or additional charges.

If you do not want to pay premiums in the future, you can also surrender the policy. By now, your policy would have acquired a surrender value.

I am 35 years old and have recently bought a term insurance policy. I read an article recently that said banks can lay claim to your assets if there are unpaid loans — be it car, home, or personal loans — despite the term insurance. I would like to know if there is any way to ensure that banks cannot claim any amount received by my nominee in the event of my untimely death?

—Name withheld on request

Banks or lenders can be made a beneficiary of a term plan, only if you assign the life insurance plan to them. The process of transferring your rights to another person or entity is termed an “assignment”.

The assignment is common for large loan amounts, where you, as a policyholder, assign your life insurance policy to the bank (s). However, in the absence of an assignment, the bank can claim its right on the proceeds only through the courts by attaching your estate to recover the loan.

As for a married woman, the amount can be secured from financial creditors by buying the policy under the Married Women Protection Act. Proceeds arising from such policies would then belong solely to the wife.

Abhishek Bondia is principal officer and managing director, SecureNow.in.

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