How to Renew a LIC policy?
A life insurance policy pays the benefit at maturity or offers coverage only when you as a policyholder continue to pay the premium regularly and without a break. Many insurers have digitised the entire process. That is, the renewal of a life insurance policy can be made online.
But a renewal process comes with various nuances. Here is what you, as a policyholder, should know about the renewal of life insurance policy.
What Happens if the Policy is Not Renewed?
For those LIC policyholders whose policies have lapsed, they are still eligible to apply for LIC’s IPO under the policyholder category.
Keep in mind, if the premium dues are unpaid over a certain period, usually 5 years, the policy may lapse. And you may lose all or part of its benefit.
In case you have not paid your LIC premium since March 2017 you may be eligible to revive your policy and reinstate its benefits. But, if you have not paid it since 2015, your policy will continue as a lapsed policy. And you may not be able to revive it. Thereby, losing out on the benefits the policy could have offered.
- For instance, say you have a pure term insurance policy. That is, the policy pays the amount to the nominee only upon the death of the policyholder. If you had stopped the premium payment and the policy lapsed, then your nominee (wife/husband/children) may not receive the policy money.
- Similarly, in the case of a savings plan, the maturity amount from the life policy may not be received by the policyholder or the nominee. And lapsed policy usually doesn’t offer coverage benefits either.
Generally, if you miss the first premium due, insurers allow a grace period of 15 to 30 days. During this period, you can pay the premium due. When the premium dues are unpaid towards a policy, the policy lapses.
Also, read How to Apply for LIC IPO as a Policyholder
Renewal Process
A lapsed policy becomes active when premiums dues along with penalties are paid to the insurer. Insurers allow policyholders to revive life policies within a certain period, usually 5 years. Your policy document will mention whether your policy is eligible for revival (within the time frame) if lapsed.
But if your policy document has no mention of revival, then insurers allow revival/renewal of policy on a case-to-case basis, based on the reasons.
If revival is allowed, then you must pay the total premium dues along with penalties and other charges. These usually vary with insurers.
For instance, a lapsed LIC’s Jeevan Labh policy can be revived during the life of the policyholder but within 5 years from the date of first unpaid premium. And LIC allows for such revival only upon payment of all premium arrears along with interest (compounded half-yearly). The rate of interest is fixed by LIC from time to time.
Let’s take another example, SBI Life. The insurer too allows for policy revival, provided it happens within 5 years. The policyholders not only must pay all the premium dues but also the interest for late payments. SBI Life for its eShield policy charges nominal interest per annum plus 250 basis points higher than the current repo rate in the market.
Policyholders can also revive their policies, if it falls within the revival period, during revival campaigns conducted by insurers. Usually, when these campaigns are live, life insurers waive off late payment charges. So, watch out for such opportunities.
How to Revive
While policyholders can pay the entire premium due along with interest to revive the policy, it is left to the discretion of the insurers to accept or reject your policy. Though rejection is rare, it is not unheard of.
Once the policy is revived, the benefits from the policies are also reinstated.
Though the revival process is made online, in case you find any blockers, visit the nearest branch, or reach out to the customer care service of the life insurers. If you know any life insurance agents, you can take their help.
But as a good practice, it is better to keep the policy active by paying premium dues on time.
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.