Can I Make the Payment Now as I Missed the Last Premium of Life Policy?
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Adopting a life policy is the first step of financial planning. To maintain this security cover, it is important to make timely premium payments. But due to negligence and other unforeseen circumstances, people fail to pay their premiums on time. There are several ways to revive the policy and pay the premiums at the later date to preserve the policy, even if an individual fail to pay them on its due date. The right to ask the insurer to reinstate the policy is included in the policy document.
Read: What Is the Right Age to Purchase Life Insurance?
What Happens if One Misses Paying the Premium of Life Policy?
There is a wide misconception that failing to pay the premium results in the lapse of the policy. Some policyholders even decide to forego their policy, thinking that it cannot be revived. But this is not true, if the policyholders fail to pay the last premium of life policy, this is what they can do:
1. Utilizing the Grace Period
After realizing that the individual has missed paying the premium before the due date, they have to call the company or the agent, to learn the status of the policy. The majority of the insurance companies offer a grace period of at least 30 days after the due date. For term insurance policies, the grace period of 15 days is applicable. This period can be utilized to pay the premiums without any penalty.
2. Reviving the Policy Within Six Months
Even if they miss to pay during the grace period, it doesn’t mean that the policy has lapsed. Policyholders can revive the policy until six months from the due date, including the grace period. It might be required to pay the outstanding interest amount on the premium as a penalty. The penalty amount depends on the insurance company, the nature of the policy, and the premium amount.
Must Check: Factors that Determine Your Life Insurance Premium
3. Reviving the Plan Before Expiry
Any policy can be revived during the lifetime of the insured but before the expiry date of the policy term. The policyholder has to submit proof of continued insurability to the insurance company for their satisfaction and clear all the arrears of the premium, along with the penalty, to revive the policy.
How to Avoid Missing to Pay a Premium?
To prevent instances such as missing the premium of a life policy, the policyholder can pay the premium annually as a single payment. It is also easy to remember rather than making payments in instalments. Policyholders can also set up electronic funds transfer at regular intervals to automate the payment process.
Bottom Line
Financial experts reveal that under no circumstances, an individual should discontinue an old policy and apply for a new one, as the benefits of a policy bought at a younger age have accrued benefits. But if the policyholder has to revive the policy after five years, it is better to discontinue it and adopt a new policy, as the premium and the penalty will be very high at that time.
Check More: Why Are Life Insurance Riders Important?
