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A life insurance policy is very important for a person. Individuals should have a life insurance policy in their portfolio so that in an unfortunate event the financial condition of the family is protected. Sometimes due to financial constraints, a person is not able to pay the premium on time which results in the policy getting transferred to a grace period. A grace period comes after the due date and is generally there to reduce the chances of a lapsed policy. It is the period 15-30 days after the due date where the premium is accepted without any extra charges.
If a person is not able to pay the premium even in the grace period it results in the lapse of the insurance policy. There is an option to revive the lapsed insurance policy and make it active again. During the grace period, the insurer is still accountable for paying the death benefits to the nominees of a person, but if the person dies after the grace period and the premium is not paid then the policy lapses, and no death benefit is paid to the nominee.
If for any reason the policy lapses it can be reinstated and the insurance company will help you in the process. It depends on the type of policy, the terms and conditions, and generally a period of two years in which a lapsed policy can be revived by paying the missed premium along with the interest. The penalty amount depends on the type of policy. It is up to the discretion of the insurer to accept or reject reinstatement, but rejection is quite rare. On revival, the benefits will also be reinstated for the person.
It is in your interest to revive a lapsed insurance policy as soon as possible, as it will be easier and cheaper to do it. If it is within six months of lapse you may be required to submit a declaration of good health along with the unpaid premiums and interest penalty. When it is more than six months you will have to go for fresh medical checks.
You will be thinking that it would be expensive to revive a lapsed insurance policy, but taking out a new policy will be more expensive. In this case, you will have to forfeit the premiums you have already paid on the lapsed policy. In the new policy, the premium may be higher as premium increases with age.
For reviving the policy you have to fill out the reinstatement application. It is always better to pay the premium on time and never let a policy lapse which would be good for the dependents in the family.