Very easily in life, we tend to forget things. Ever forgot your daughter’s birthday? Yes, that can be chaos. But there are less important things than your children that slip out of our attention. Like insurance premiums. Insuring your health and that of your family is a thing of importance for any person. Insurance companies help you get that fear away but with a set of rules. So the intimidation is still there if you fail to keep up with the rules because there is nothing better than free money and insurance companies want some of it too. When you buy insurance for your life, your family’s health or your vehicle, always read the rules and regulations of the insurance firm and make sure you know what could cause the insurance to go void. Some insurance companies collect their premiums from the account in which your salary is credited, but most of them would ask you to pay premiums into your insurance account. Failing to do so has consequences and you might have to go through the annoying paperwork again.
The Grace Period
When it comes to money, financial institutions are strict about their rules. But every financial institution like a bank or an insurance firm is required by law to allow its subjects to have a period wherein they can solve their problems and come up with the money at that time. This is the grace period. During which you can work all your limbs and pay the institution. If you have taken life insurance, then your insurance firm must have allowed you a grace period of one month. During the grace period of life insurance policies, you can pay the premium without incurring any overhead charges or fines. Once the grace period is over, it depends on the nature of the insurance firm and the policy you have bought to be able to renew your policy and restart the premium payment.
The factor that affects the renewal of the policy most is the cash surrender value of your policy. The two kinds of policies – with cash surrender value and one without it, are treated differently by insurance firms. Insurance policies with benefits on maturity generally have a cash surrender value. While term insurance policies don’t have a cash surrender policy. So how are the two types of policies treated differently by the insurance companies?
Policies With Cash Surrender Value
As you might have already sensed that your insurance policy is a kind of saving. Cash surrender value takes into consideration this element of an insurance policy. Though the early years of an insurance policy rarely bring in any value which weighs out the premiums you have paid, at the time when you want to surrender your insurance policy, you can have a considerable amount of the premiums you have paid to the company.
If you are unable at a point in the year to pay the premiums of your insurance, the insurance company will agree to pay the premiums on your behalf. The only condition that you have to comply with is to take a loan against your previously accumulated cash surrender value. Such kind of a loan, also called the Automatic Premium Loan is granted by the insurance company but then your insurance becomes a costly burden until you have paid the interest on the loan amount or have paid the previous premiums in full. It is better if the premiums you pay, after taking the loan on the cash surrender value accumulates to be more than the outstanding loan amount. If you fail to pay dues before the end date, your policy lapses and the insurance cover is void by the company.
There are other options available in case forgetfulness is not your excuse and you can’t afford to pay the amount of premium at the time. Rather than surrendering your policy, you can simply avail the lower premium options of the policy, wherein you won’t have to pay an amount bigger than your budget and you can still retain the policy cover. Or you can simply sell the policy to someone else and get a better deal than the cash surrender value.
Policies Without Cash Surrender Value
Policies without cash surrender value, like life and health insurance, tend to lapse directly if the premiums are not paid within the grace period. The policies are sure to get lapsed if it is a general insurance policy but insurance on motor vehicles can still continue if you pay the financing charges to the insurance company.
After the Lapse of Policies
Failing to pay the premiums on time cause your policy to get lapsed and then the insurance cover that you have is blown. But that is not the end for you there. Policyholders can revive their policies. Insurance companies generally allow you to pay all of your dues including the late fines and extra renewal charges. You can opt to file for a revival of your policy within two years after the policy has lapsed. In case of a health or life insurance, you must provide proof of being in good health to the insuring company before you can revive your insurance.
So forgetfulness doesn’t have a cure. You may forget to pay your insurance premiums and let it get lapsed to the insurance company unless you get notified of the grace period that allows you to pay the dues. If you’re unable to afford the premiums, you can opt for an expensive loan to keep your insurance coverage intact. In case the insurance policy lapses and you want to revive it, remember that the terms and premium plan that you started with won’t be the same next time. So, always set a reminder so that you never miss a premium payment and get to keep your insurance cover.
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