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To have a policy is always commendable but maintaining it is something that not everyone is good at. Your bit of negligence may expose you to undesirable consequences. If some sudden prolonged expense has affected your premium paying efficiency and the current status of your policy is 'lapsed'? What would you do? The expenses have been abrupt and unexpected, so the only solution that seemed right to you was to cut down on premiums. And you had to compromise on your policy. Now in such a situation the best thing that can be done is to revive the policy than surrendering it. A lapsed policy can be revived anytime within 5 years from the date of the first unpaid premium.
Lets consider an example. The Life Insurance Corporation of India (LIC) usually offers grace period of 15 days to pay premiums. In case the policyholder fails to pay premiums within this time, the policy is considered lapsed.
Say for example if Mr. Chawan has bought a life insurance policy for a term of 15 years, and has paid premiums religiously for the policy for 6 years. Now for some reason say a financial crisis has prevented Mr. Chavan from paying the premiums and the policy gets lapsed. If things have taken a turn for better and he is again in a position to pay the premiums, he can revive his lapsed policy provided it has not exceeded a gap of 5 years.
If Mr. Chavan revives his policy, he would need to pay the total premium due amount along with the interest. After clearing the dues, he can continue paying the premiums as per the terms and conditions of the policy. If Mr.Chavan had decided to surrender the policy and pick up a new one instead, he would have to pay higher premiums considering his age as the premium payment is influenced by age. If required, the policyholder will have to fulfill other health requirements too.
If Mr. Chavan had to meet with some sudden unfortunate event, his nominee can claim for the sum assured provided the premiums have been paid for atleast three complete years.