img Insurance is a long-term agreement. It is beneficial for the policyholder to continue his policy till the end of term to reap full benefits of the policy. It is the policyholder who bears maximum losses if the policy is discontinued untimely. So here’s all that you should be aware of, regarding Policy Lapsation.
WHAT IS POLICY LAPSATION?
When a policyholder is unable to pay the insurance premium due to any reason besides death, then the policy cover lapses which is referred to as ‘Lapsation’.
WHEN DOES YOUR POLICY LAPSE?
Insurance companies send reminders for premium payment much before the due date. If by the due date, premium is not paid by the policyholder, the insurance company provides a grace period of 1 month for premium payment. If the premium is still not received by calendar the end of the grace period, the policy lapses. The policy will lapse with effect from the due date of the premium. If the policyholder dies during the grace period, his beneficiaries would still receive the final benefit amount after deductions of the policy premium that are due.
IMPACT OF LAPSATION ON POLICYHOLDER:
If the policyholder does not manage to make the premium payment even after the grace period comes to an end, then he loses the benefits of the life insurance cover and suffers a financial loss. tabe
• Life Cover Ends: The insurance company withdraws the life cover for the sum assured and no benefits are paid to the policyholder once the policy has lapsed. Moreover, if the policyholder dies after the policy lapses, the insurance company does not take responsibility for any payment.
• Financial Loss:
Traditional Policies: The premium paid by policyholder is retained by the company. Unit Linked Insurance Plans: ULIPs are both for insurance coverage and act as an investment plan as well. In case of lapsation, ULIP benefits are also terminated, and all the additional investments are frozen. If the policyholder is charged with discontinuation charges, then the fund value after the deductions goes to the discontinued policy fund. The total amount of this fund along with the interest gets
paid only after the completion of 5 years.
Max Life Insurance Company Limited is a joint venture between Max India Limited and Mitsui Sumitomo Insurance Co. Ltd. Max Life Insurance Company Limited; 11th Floor, DLF Square Building, Jacaranda Marg, DLF City Phase II, Gurgaon (Haryana)-122002. Insurance is the subject matter of solicitation. For details call Customer Service (Toll Free) at 1800 200 5577.
ARN: Max Life/Ads/CRM/Havas WW/EDM/2014/183