Purchasing term insurance has now become a necessity rather than an option. Since life is uncertain, nobody knows what is going to happen next. Though it is good to purchase term insurance, sometimes, things don’t work in our favour. Be it mismanagement, lack of financial resources, or neglecting it intentionally, there are many ways under which many policyholders fail to make any payment even in the grace period which leads to nothing but lapsed policy. This is where the importance of the “Reinstatement” period comes in!
In the world of term insurance, the concept of reinstatement holds significant importance as it offers the opportunity to restore a previously terminated term policy. Reinstatement refers to the process of reviving a term insurance policy that has lapsed due to non-payment of premiums. This option becomes available to policyholders within a specific timeframe known as the revival period, which is provided by the insurance company. By utilising the revival period, policyholders have the chance to rectify any missed payments and restore their policy to its active state. This not only safeguards their financial future but also ensures that their loved ones are adequately protected in the event of their untimely demise.
Features & Benefits of Reinstatement of a Term Insurance Policy
Here is the list of the features and benefits of reinstatement of a term insurance policy.
- Existing Terms of the Insurance Policy
One of the key features and benefits of timely reinstating your lapsed term insurance policy is that when reinstating a lapsed policy during the revival period, the original terms and conditions specified by the insurer will continue to apply. This clearly means that the policyholder will be subject to the same provisions, coverage limits, and any other contractual obligations as outlined in the policy agreement.
- Premium Payment
Another major benefit of reinstating your term policy is that as compared to purchasing a new term policy, policyholders must clear the outstanding payments for a lapsed policy to enjoy lower premiums. Remember that the impact of premiums may be higher if there have been changes in the health of the insured. Therefore, policyholders must carefully evaluate their options and consider the potential financial implications before deciding between reinstatement and purchasing a new term plan.
- Undoubtedly Policy Period
One of the major features of considering reinstating your lapsed term policy is that many policies come with an incontestability period. For those who don’t know, this period typically includes the first two or three years from the date of policy purchase, although the duration may vary among insurers. During this time, the insurer retains the right to question the “Payout of the Policy”, especially in cases where there is suspicion of fraudulent claims or misrepresentation.
- Familiar Policy’s Terms & Conditions
There is no arguing with the fact that reinstatement allows the policyholders to maintain familiarity with the original terms and conditions of their policy. It clearly means that there is no need to adjust to new policy provisions or coverage limits, providing consistency in understanding and managing the policy. By reinstating the policy, policyholders can avoid potential changes or updates in new policy offerings. These changes could include modifications to coverage limits, premium rates, or policy provisions.
- Peace of Mind
Last but not least, reinstating a term insurance policy offers peace of mind to the policyholders that they have reinstated the term policy to protect their financial security net. Everybody should know that life is unpredictable, and unexpected events can occur at any time. By reinstating a lapsed-term insurance policy, policyholders ensure that their loved ones will be financially protected in the event of their untimely demise.
How To Reinstate a Lapsed Term Policy?
So, now you have a lapsed policy, right? Well, that’s the reason, you’re here, looking to reinstate a lapsed term insurance policy. Don’t worry, it is easy! Listed below are the steps to reinstate a lapsed term policy.
- During the Policy’s Grace Period
If you want to reinstate the lapsed term insurance, then you can easily do it within the grace period. It is the right time that you cannot afford to miss to reinstate your lapsed policy. If you don’t know, the grace period is an additional period provided by the insurance company, typically after the premium due date has passed. During the grace period, the policyholders have the opportunity to pay the outstanding premium amount without any additional charges or penalties. By making the payment within the grace period, the policy can be reinstated and the policyholder can continue to enjoy the benefits and coverage provided by the term plan.
- After the Expiry of the Grace Period
Another way that you can consider reinstating your lapsed term insurance policy is when your grace period has expired. If the policyholder fails to make the premium payment within the grace period, the policy becomes inactive or lapsed. However, sometimes, it is still possible to reinstate the policy beyond the grace period. If you want to reinstate the policy beyond the period, then the policyholder is required to pay the accumulated premiums along with any additional late fee penalties as specified by the insurer.
What are the Steps To Avoid a Lapse in a Term Policy?
If you are looking to avoid a lapse in a term insurance policy, listed below are the steps to consider. Let’s discuss them in detail!
- Make a Timely Premium Payment
One of the best ways to avoid a lapse in your term policy is to make timely payments. Doing so is the ideal way to ensure that your term insurance coverage will remain active and won’t lapse. It is essential to make timely premium payments to maintain continuous protection for yourself and your loved ones. By adhering to the due dates and paying premiums promptly, you can avoid any disruption or gaps in your coverage. In case, you are unable to make the payment on the due date, it is important to take advantage of the grace period provided by the insurance company.
- Always Keep your communication Details Updated
Whether you have just changed your residence or mobile number, every policyholder needs to provide updated details to the insurer. The purpose of these notifications is to keep you informed about your policy and its requirements, such as premium payment dates, policy updates, renewal reminders, and other relevant information. They serve as helpful reminders to ensure that you stay updated on your policy status and fulfil your obligations on time.
- Keep an Eye on Payment Capabilities
Another popular way to avoid running into a lapsed term policy is always to be aware of the payment capabilities. It is no secret that insurance providers often offer flexible premium payment options. Assess the available choices, such as monthly, quarterly, semi-annual, or annual payments. Policyholders the convenience, cost-effectiveness, and suitability of each option based on their financial situation. Always look at your overall financial plan and consider how a lumpsum premium payment may impact you. Try to create a balance to avoid running into a lapsed term policy.
Points to Keep in Mind about the Reinstatement Period in a Term Policy
Listed below are the important aspects to keep in mind regarding the reinstatement period in a term insurance policy.
- Submit the Application
If you are looking to reinstate a term policy, then you must apply directly to the insurance company. This application generally involves completing a standard revival form provided by the insurer. Depending on the insurer’s terms and conditions, additional formalities may also be required. These additional requirements could vary, so it’s essential for policyholders to carefully review the terms and conditions provided by the insurer to ensure compliance with all necessary procedures for reinstatement.
- Medical Check-up is Necessary
No matter what, every policyholder should be aware of the fact that a medical checkup might be required to verify their good health. It has been observed that many insurance companies offer the convenience of conducting these medical checkups either at the policyholder’s home or at designated clinics. The specific requirements regarding checkups may vary among different term insurance companies.
- Go Through the Terms & Conditions
Another major aspect to keep in mind is that every policyholder needs to review the terms and conditions of the policy document carefully. Changes may have occurred since the policy was initially taken out, and these changes will be clearly outlined in the updated policy document. By going through the policy document, policyholders can gain a clear understanding of any changes to the terms and conditions that can affect the reinstatement process.
Frequently Asked Questions
The sum assured may fluctuate due to certain events such as changes in the policyholder’s health throughout the reinstatement period.
No, there is a certain window of time after the grace period during which reinstatement is possible. Usually, it is determined by the policy document’s provisions.
After a policy is reinstated, the premium amount may vary based on the insurer’s terms and conditions.
