An investment in Unit Linked Insurance Policy [ULIP] has its own set of pros and cons. While we are familiar with its perks due to its mass popularity, some of us are unaware of its cons. One of the major disadvantages of a ULIP Policy is seizing of all benefits at the time of a lapse of the policy. When a ULIP insurance lapses, you no longer hold the rights and benefits of the same. However, insurance companies allow the revival of these lapsed policies for the betterment of the investors and his family.
If you are looking forward to reviving your lapsed policy, go through the following things mentioned below. Take a look:
How does a ULIP Policy lapse?
The premiums are the deciding factor at the time of the purchase of the policy as well as the lapse of a policy. Since the insurance companies allow the payment annually, monthly and quarterly, it is the duty of the policyholder to pay the premiums on time. If you are still unable to pay the premium, insurance companies offer a grace period of 60 days. Failure to make the payment even in the grace period further leads to lapsing of the policy.
When to revive a lapsed ULIP Policy?
The revival of the policy typically depends on the time of the lapse of a policy. If you have been actively holding the policy for a period of 3 years, then you have to revive it within 2 years. While reviving the policy within the first 6 months is easy, reviving the policy after 6 months comes with a price like paying hefty penalties.
The process of reviving the policy within 6 months
- Contact the insurance company
- Pay the outstanding amount of the premiums
- Revive the policy
The process of reviving the policy after 6 months
- Contact the insurance company
- Pay the outstanding amount of the premiums
- Pay the additional rate of interest
- Pay the penalties and the new increased premiums
- Provide the insurance company with a health certificate
- Revive the policy
Benefits of renewal of policy
After the tenure of your policy expires, the insurance companies typically provide you with options of surrender or revival. In order to continue the policy, opt for revival within 6 months of the lapse. When you revive your policy, you will be able to get hold of all the benefits which were applicable previously. Reviving the policy simply means securing the entire family from unforeseen events.
Take a look at the benefits of the revival of the ULIP policy mentioned below in order to make informed decisions:
- According to the new rules, the biggest advantage is that the policyholder gets more time to revive the policy. Ideally, the policyholder can renew the policy within two years after the lapse.
- When a ULIP lapses, the insurance company moves your money to the discontinuance fund. Post the introduction of new rules by the Insurance Regulatory and Development Regulatory [IRDA], the money lying in the discontinuance will earn 3.5% for the policyholder.
- The insurance companies can levy fund management charges up to 0.5% in order to manage the policyholder’s funds.
- Introduction of new IRDA rules is a blessing for those investors with irregular or seasonal flow of incomes. These investors can easily skip the two annual payments of the premium.
Now that you know how to revive a lapsed ULIP Policy, what are you waiting for? Revive your policy to the earliest as it looks after all your financial needs for a longer duration. Long term investment ensures that you hold this policy long enough to allow you with more than just high ULIP plans returns. In the end, a ULIP investment is only worth it if it keeps you covered for a longer duration of time.