It is advisable to always renew your insurance policy on time before it expires, as this will avoid any financial implication for you.
Just two months ago, Rakesh Gulati’s family pleaded with a life insurer not to dismiss their claim and instead pay the sum insured so the family could meet the daily expenses. Rakesh – a 38-year-old software engineer – died in a traffic accident on his way home to Delhi from his office in Gurugram. Rakesh passed away after paying premiums for several years for his term life insurance plan which he purchased in 2015. Unfortunately, in the end, the insurer informed family members that the last premium of Rakesh’s term life insurance policy was unpaid, hence his policy lapsed. and the request was denied.
It was devastating for the family to learn that Rakesh’s life insurance policy had lapsed as the lost profit nearly reached a crore. Rakesh’s family is just one of countless other families who face endless financial hardship due to lapsed life, health or auto insurance policies. In most insurance policies, the worst impact of lapse is on the policyholder and his or her financial dependents because, in addition to a loss of coverage, there is also a significant loss of several key benefits associated with the lapse. insurance policy.
All insurance policies – whether life, health or automobile – have an expiration date and if the policyholder forgets to renew the policy before the expiration date, the policy becomes obsolete. An expired insurance policy is equivalent to having no policy because the coverage provided by the policy is no longer valid. Once your policy expires, your insurer will not be able to provide you with financial assistance. It is therefore advisable to always renew your insurance policy on time before it expires, as this will avoid any financial implication.
However, if one of your insurance policies has lapsed due to unavoidable circumstances, there are ways to review or renew your expired insurance policy and re-secure financial coverage around you and your loved ones. relatives.
Term life insurance policy
When you buy term life insurance, the insurer gives you the option of paying the premium in monthly, quarterly or semi-annual installments, or annually as a lump sum. You can choose one of the options depending on your spending capacity. Once you stop paying the premium for your term life insurance plan, the policy becomes inactive, but it does not lapse. The insurer grants you a grace period of 15 days – in the event that you pay the premium in monthly installments – and a grace period of 30 days – in the event that you pay the premium quarterly, semi-annually or annually – to reactivate your term plan. However, if you still don’t make the payment to renew your term insurance, the policy will lapse.
In accordance with the directives of the insurance regulator, the maximum renewal period for term insurance policies issued before December 2019 is 2 years, while for policies issued after December 2019, the renewal period is 5 years, after the termination of the policy. In order to reactivate an expired term life insurance policy, the policyholder must pay all unpaid premiums – from the date of the first unpaid premium until the date of recovery – as well as interest on unpaid premiums and taxes and levies, if applicable. In some cases, the insurance company may even request a medical examination again if the contract is taken over.
Health insurance policy
Lapse has the biggest side effects on health insurance, as policy discontinuity resets the waiting period for normal and pre-existing conditions, and the accumulated no-claims bonus is completely lost. It is always advisable to buy early so that the waiting period is served at the right time. If you are unable to renew your health insurance policy on the policy renewal date, the insurer gives you a 30-day grace period to renew the policy. If you pay the premium within those 30 days, your policy is reinstated. However, if you fail to renew the policy even during the grace period, the policy lapses and can never be reactivated. The only solution you will have left is to purchase new health insurance coverage under which you will have to serve a new waiting period.
Auto insurance policy
If you don’t want to lose the no-claim bonus, it is advisable to reactivate your expired car policy within 90 days or you will lose the entire no-claim bonus which can reach 65% of your own damage. premium and is usually worth several thousand in the case of a mid-size car. To renew the expired policy, you can contact the insurer directly or through intermediaries. Moreover, considering the ongoing COVID-19 pandemic, you can also take advantage of the self-inspection video feature for the physical check of your vehicle. As part of this feature, all you need to do is upload video and photos of the vehicle to the insurer’s app and renew the policy within hours without needing to contact an agent.
(Par Amit Chhabra, Head-Health Insurance, Policybazaar.com)
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