What Happens When You Stop Paying Life Insurance Premiums?

Life insurance is your life insurance policy. It promises to protect you in the event of an accident, but only if you pay your premiums. No premium, no lifetime option. This blog explains in detail what can happen if you stop paying your life insurance premiums.

Life insurance is no longer luxury; it is important for every person, young or old, male or female. Because the real life is unpredictable. Disaster awaits us at any moment. In such cases, it is wise to protect our lives from danger. Life insurance does. However, nothing comes for free and so there is a small element of security offered by life insurance plans.

They come with the obligation that the insurance buyer or the policy holder pays a lot of money to the insurance company every time, in return for the services they provide. This is a simple give and take, meaning that the insurer is responsible for paying the insurance premiums until the borrower pays the premiums. If, for any reason, the insurance provider fails to pay the premium, the insurer is no longer responsible for providing life insurance coverage.

What is Life Insurance Protection?

We have been talking about an insurance company that is offering life insurance to policy holders. But, what exactly is life insurance? It is a legal document that is signed between the insurance provider and you, stating that the former agrees to financially compensate your beneficiary or nominee (usually a relative) in the event of your death.

To ensure this financial protection for your loved ones in your absence, the insurance company wants to do you a little favor in return. You will need to pay a certain amount called premium for the insurance on a regular basis.

Is There a Deadline for Paying the Fee?

Yes, according to the rules set by the Insurance Regulatory and Development Authority of India (IRDAI), the last day to pay your premium to the insurance company is 30 days from the due date. This extended period is known as the grace period and is allowed for all policyholders life insurance plans.

Note that the amount paid during the grace period is usually more than what would have to be paid as a fixed premium by the insured.

What Happens If You Don’t Make Payments By The Due Date?

A whole life insurance policy is based on the fact that the insurer will pay a large sum of money to your beneficiary at the time of your death in return for regular payments to the insured from your side. If you become insolvent in your life insurance business meaning you cannot or stop paying premiums to your insurance company, it simply relieves the insurer of this responsibility.

In other words, your life insurance policy is canceled by the insurance company due to your failure to pay the premium. However, please note here that it may also depend on the type of life insurance you have purchased.

For example, if you have a term insurance policy, the insurer may expect you to make your payment before the due date. Failure to do so may result in your insurance being voided. This means that you will no longer be eligible to enjoy any insurance benefits due to this plan.

However, in the case of other life insurance plans, such as Unit-Linked Insurance Plan (ULIP), the policy will lapse if you do not pay the premium within the first five years of the policy term. Upon termination, the entire benefit of the plan will be transferred to the discontinuance fund.

What happens if my insurance policy expires?

Even if your life insurance policy expires due to non-payment of premiums, the road is not so dark. You have the option to reinstate or reinstate your lapsed life insurance policy. However, the reinstatement of the policy is usually acceptable only if you receive a penalty along with late repayment and additional payments to your insurance company.

Apart from that, your insurer may also ask you to undergo a medical examination before your plan is reinstated and provide proof of continuity to the insurance company. Only after completing all these steps, the insurance agent will agree to return the life insurance policy to the owner.

What Else Can I Do If I Still Can’t Pay My Insurance Premiums?

It may make sense to replace your expired life insurance policy if you continue to make regular payments. However, for some reason, you cannot pay your insurance premiums, there are several options that you may want to consider when trying:

  1. Output: Some insurance companies allow policyholders to refund the premiums they have paid so far. However, you may need to check with your insurer about what’s on your insurance policy to see this facility. If you choose to cancel the policy, be aware that you will lose all life insurance premiums under the policy. Apart from that, you may also have to pay tax depending on the amount you withdraw.
  2. Reduced Payments: If you are not happy that your insurance has been completely canceled, you can consider lower premiums offered by other insurance companies. Here, if you are unable to pay the premium, your insurance will allow you to stop paying; however, your policy is still active but with reduced life insurance coverage. A reduction in the benefit provided by the insurer may be considered based on the amount of money the insured has paid up to that time.

Should I Renew My Life Insurance Or Buy A New One?

Since restoring or restoring your original policy is not easy, including late fees, penalty fees, and additional fees, some policy holders may consider purchasing a new policy as a better and more profitable option.

However, before you jump too soon to make a decision, consider the pros and cons of each:

  • Buying a new whole life insurance policy can result in the loss of all premiums previously paid.
  • The premiums paid on life insurance are directly related to the age of the policy holder. This means that as your age increases by a year, the amount paid also starts to increase. If you had bought your previous policy a few years ago, you would have paid less than what you would have to pay now if you bought a new policy (due to the increase in your age over the years). This will make the process more expensive in the long run.

Therefore, it seems that restoring the previous (lost) policy seems to be a better option than the idea of ​​buying a new one. However, you may still want to do your research and try all of your options.

Also Read: You Shouldn’t Cancel Your Term Life Insurance – Learn Why

Finally

Payment of insurance premiums is our duty to each insured. If you are unable to pay the premiums, you can choose to renew the policy or purchase another one. However, do your due diligence before jumping into anything.

Among many life insurance companies in India Offering life insurance plans to prospective policyholders, Life Insurance Corporation of India offers life insurance with many beneficial options to policyholders. Remember to look for the best insurance company before you buy one for yourself or your family. Make sure you pay your premiums regularly to avoid cancellation of the policy.

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