Missed Paying Your Insurance Premium? What Should You Do?

| Friday | 4th November, 2022

Summary:

Life insurance is a vital safety net for your loved ones, and you must maintain it for as long as you have dependents. Of course, it is recommended that you pay your premiums on time to ensure this. However, one may miss out on their premium payments due to financial constraints hindering the ability to pay the same. Have you missed out on paying your life insurance premiums? What should you do in such a scenario? Here is a guide that will help in these situations.

Skipping insurance premium payments - What should you know?

Before you finalize the purchase of your life insurance policy, you should always look at the premium payable for a certain amount of coverage to ensure that it is within your budget. This can also be done when comparing various plans using a life insurance premium calculator. Once you are done, you will have an idea of what you have to pay and also you can choose your payment frequency, i.e. monthly, quarterly, annual or half-yearly payments. However, if by any chance, you miss the due date for the payment, you should be aware of the following:

• Although missing the due date for premium payment is not advisable, most insurance companies give a grace period of 15-30 days after the due date passes. You can clear the dues in this period without any extra charges. The death benefits of your policy are applicable in this period. In case of your untimely demise during the grace period, the insurer pays out the death benefit after deducting the due premiums
• Not paying premiums even in the grace period would lead to a policy lapse. This means that you will lose policy coverage, and any claims made by your beneficiaries will no longer have validity

Now, all is not lost if you miss paying the premiums even in the grace period. Here`s why:

• You can still revive your lapsed policy within a particular duration. Insurance companies also dispatch renewal notifications to all customers before the policy expiry date. This renewal window varies from one insurer to another, and you can find the duration applicable in your case by checking the policy document.
• You can renew your policy through the insurance company`s website or your agent. You can also visit the branch for this purpose or do it through the insurer`s mobile app, if possible.
• You will only require your KYC papers, including your age, identity, address proof, and the original policy document

Some policies allow reinstatement through applications after policies lapse, depending on specific terms and conditions outlined by the insurer. You may have to go through medical check-ups and provide all relevant documents as required by the insurance company. You should always reach out to the insurance company if your policy lapses and you have missed the grace period itself.

In most cases, you can reinstate your policy within 3-5 years, known as policy revival. To revive your lapsed policy, however, you will have to pay all the premiums due and the penalties imposed by the insurance company. For instance, suppose your annual premium is Rs. 30,000 for your insurance policy, and you do not pay it for two years. This means a due premium of Rs. 60,000 for reviving your policy. At the same time, the insurance company may charge a penalty of 10% of the amount due in this case. This works out to another Rs. 6,000. Hence, the total amount payable is Rs.66,000 if you wish to revive your policy.

Tips to avoid missing premium payments

• Ensure you mention accurate contact information (phone numbers and email addresses) in your insurance policy document. This is vital since the insurance company always contacts customers with reminders and notifications on the premium payment date.
• You should always keep an eye out for these reminders, which will help you avoid missing out on your premium payments.
• You can also choose the auto-debit option from your bank account on a particular date. This will help you avoid the issue altogether. However, you should always have sufficient funds in this account, so that is something to be maintained without fail.
• You can also choose yearly or half-yearly premiums, so you do not have to worry about paying monthly premiums.

You should always plan for the premium payment when you buy any life insurance policy. Make sure you have at least six months` worth of premiums in your account. If you cannot stretch till this point, keep it to three months at a minimum. This will help ensure that the scenarios where you cannot pay your premiums due to fund delays or other unforeseen expenditures are avoided. Remember that your policy coverage is a financial safeguard for your family in your absence.

Timely payment of premiums will help you keep the policy active and maintain all the inherent policy benefits. Auto-debit plans are usually the best options. If you get a sizable bonus, you can also invest the same in yearly premiums if that is more convenient for you. Make sure that your premium payment does not compromise other investments and necessities. Smarter financial planning is needed in this case.