What Steps Should Be Taken When Life Insurance Policy Lapse?
The trend of buying life insurance is increasing rapidly. Today every person wants to secure their life for the future. When a person owns a life insurance policy, it means that the life insurance company assures the life of the person. Having a life insurance policy has immense benefits as it acts as a helping hand for the family, and it is a type of long term policy. The benefits of life insurance force people to purchase the policy. If a person wants to invest their money for a long time, then spending money in life, insurance is the best choice. The tenure of the policy depends upon the plan and after a point of time, the life insurance lapse. The term lapse means that the life insurance policy is expired, and it is no longer activated.
Steps involved when the life insurance policy lapse
Lapse means when the contract between the policyholder and the life insurance company expires. It occurs when the policyholder fails to pay the premium amount and the installment. Then the life insurance company cancels the policy. The term lapse means that the policyholder or the beneficiary will no longer get the claim or the death benefits at the time of maturity. In this, the life insurance company is no longer liable to pay the amount of the policy because the policyholder fails to pay the money to the company.
When the policy is a lapse, then the life insurance company will not provide any benefits to the policyholder and the members of the family. When the policyholder is no longer paying the installments, then the life insurance company gives a reminder to the policyholder about the payment of the installments. It means that the c life insurance company provides the grace period to the policyholder so that he can make the pending payment. If possible the for the policyholder to pay the amount in the grace period. Then the lapsed contract between the policyholder and the life insurance company will renew. It means that the life insurance company gives a chance to the policyholder to restart their policy when the policy lapsed without any prior notice.
What is the grace period?
The life insurance company gives the extra time to the policyholder to pay the installment amount and the premium money. So that their policy will not lapse, the time given to the policyholder is known as the grace period. The grace period is the extra days allotted to the person to pay the installments after the expiry of the actual date. To avoid a lapse, the person should pay all the premiums of the life insurance policy on time, and if the person fails to pay the premium, then the company will lapse the policy. The grace period is an additional time given to the policyholder to pay the pending amount.
The grace period is the last stage before the lapsing of the policy. It comes after the premium due date is also expired. The grace period consists of one month or more, as it depends upon the terms and conditions of the policy. The interesting fact about the grace period is that if the insurer dies between the grace period, then the life insurance is liable to pay the whole amount to the beneficiary of the policyholder. But if the person didn’t die in the grace period and still not pays the pending amount, then the company will no longer be held liable for providing the coverage. Finally, the policy has lapsed when the payment is not made even in the grace period. Once it has deteriorated, then the life insurance company needs not to pay nay coverage, and the company becomes free from all the burden of paying the blanket to the policyholder.
Exceptions when the policy is reinstalled after lapsing
The reinstallation of the plan depends upon the terms and conditions of the life insurance company. If they agree to restart the program, then they can ask the policyholder to pay the premium even after the expiry of the grace period. The policyholder cannot force the company to restart the policy after the expiry of the grace period. It wholly depends upon the choice of the life insurance company. The owner once again gets a chance to reinstall their policy after the end of the grace period; if the policyholder wants to continue, then he needs to pay some amount to the company to begin their lapsed policy. But if the insurer disagrees with restarting the policy even after the end of the lapse period, then the policy seems permanently canceled for the lifetime. The tenure of reinstalling the lapsed policy varies after 30 days and eligible until the end of six months.
When the lapsed policy is reinstalling at that time, the policyholder needs to answer the few questions asked by the life insurance company. At that time, the owner of the policy needs to give the correct answers, so restart the policy. If the person tries to hide the truth from the company, then the company can cancel their reinstallation application. And the policy becomes void after this life insurance company is not responsible for paying the coverage to the ex-policyholder.
The brighter side of the re-installment period
The role of the reinstatement period is essential for both the life insurance company and the policyholder because they get an extended time for paying the installment. There may be various reasons for the re-installment period, firstly sometimes the policyholder fails to pay the money due to some reasons, but when they get additional time, they arrange the fund to pay the amount of the installments. Another reason can sometimes be the person who doesn’t follow the underwriting process, but when they get extra time, then they can complete the underwriting process. As we know that changes happen for a good reason after time breaks, the person gets time to re-think about restarting the policy or not.
Therefore, the reinstatement period plays an essential role in today’s life and has immense benefits. It works for dual aspect, one for the owner of the company and another for the policyholder. As we know that beginning the process of taking the new policy is expensive than renewing the existing system. That is why policyholder finds restarting a better option than buying a new policy. The older insurance policy is less costly than the new policy. The price of the plan is set according to the age group. If the person is older than the amount not of the program will be more than the younger ones. The best option to save money is to reinstate the idea rather than spending money on getting a new life insurance policy.
Wrapping up with:
To conclude this article, in this article, we have discussed the rules and regulations regarding the lapse of the policy and the grace period of the plan. The grace period depends upon the laws of the company. After the failure of the program, the company is no longer liable to pay the coverage amount to the policyholder. But the policyholder gets a chance to pay the amount even after the expiry of the grace period.