If you don’t buy new clothes it will work but if you don’t pay your credit card bill then it will impact on your credit score. If you don’t pay your electricity bill, then your lights could get turned off. If you don’t pay your life insurance premium; well it’s a warning signal.
The fact is that not paying your premium on time can have a devastating effect on both yourself and your family. “Lapse” is one word you never want to hear from any of your life insurance providers.
As a family man, Ravi has dependents. To secure the financial future of his family, he did the right thing by buying life insurance. He bought 3 policies at different stages of life when he got married, when he had his first child and the third after his two children were in high school. All the plans he purchased had a 30 year term and he purchased them from different life insurance providers. Why did he choose 3 different providers? It’s simple: he purchased these plans at different stages of his life and at different premium rates and every time he wanted to buy, a different life insurance provider came back with a cheaper option.
Having three policies from different providers meant he had to keep track of when to pay the premium because all of them had different due dates.
The last policy he took was of Rs 1 crore term life insurance policy and he was considering dropping the smallest one of the three, the Rs 10 lakh term policy. He told his wife that whenever the bill comes in for the 10 lakh term policy, to go ahead and let it expire.
But he missed out explaining to her which policy she needed to discontinue! Turns out she let the Rs 1 crore term policy lapse instead of the 10 lakh. What made matters worse was that he didn’t notice this till several months after the due date.
By God’s grace he was in good health. He knew he can easily reapply for a new insurance plan. But, he also knew that it would take some time to go through the medical tests again. Hoping that there was a quick solution, he got on the phone and called the insurance provider immediately. He was thrilled when he came to know that reinstating the policy was really simple.
While on the phone with the customer service representative he learned that most insurance companies provide a grace period if you miss your premium payment. The grace period is usually 30 days after the premium due date. Since it had been more than 30 days since my premium was due, he missed the graced period and his life insurance policy had officially lapsed.
Ravi had to request the reinstatement of his policy by filling up a simple form which asked some basic medical questions to make sure that his health was still intact. It was now that he realized that reinstatement could be a major issue for someone that already had pre-exisiting medical conditions another reason to never let your policy lapse.
After filling out the form and making the premium payment, his policy was reinstated.
There are plenty of things that can go wrong in life, but letting your policy lapse should not be one of them.