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What happens if you don’t pay premiums on time?

10 Oct 22      |       | ShareShare Share Blog Or copy link Copy Share this link via

Authored by: Anurag Ainapurapu
Reviewed by: Krupa Kenia

The Long Read


Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

Yes, of course! Paying term insurance premiums on time is how you can ensure your family will receive the insurance money from your life insurance company when you pass away unexpectedly. Your insurer can keep their promise of paying out the insurance money only when you have kept your end of the bargain i.e. paid your premiums on time.

Simple! If you do not pay your term insurance premiums on time, your policy will lapse. You will not only lose all the premiums you have paid so far but also all the policy benefits. This means, if you pass away unexpectedly, your family will be deprived of your life cover payout. 

 

You will essentially be putting your loved ones at risk.

Grace period is an additional period of time offered by insurers from the premium due date during which the term insurance policy remains active. It is 15 days if you pay your premiums monthly and 30 days if you have opted for an annual premium payment.

 

It is offered to help people avoid a policy lapse and pay the premium, especially when they are facing a financial emergency and cannot clear the payment on the due date. 

 

Let’s hope you will always be able to pay your premiums on time without needing a grace period to clear your dues!

Yes, thankfully you can! Here’s how you can revive your lapsed policy:

 

  • Check the revival period of your policy with your insurer. Most insurers provide a 2-3 years revival period after the lapse

  • Submit a revival application form to your insurer

  • If required by your insurer, undergo additional medical tests

  • Clear the premium dues, along with revival fees and penalty, if charged by the insurer

  • Carefully read and follow the terms and conditions of the revived policy 

 

Pro tip - Check if there are any special spot revival schemes that give a discount on penalty charges and revival fees.

 

Remember, you may now have to pay higher premiums going forward.

 

Lastly, after your term policy is revived, do not fail to pay your premiums on time, you can do so by activating autopay with your bank/credit card.

 

Our advice? Don’t make a habit of letting your policy lapse and then reviving it!

 

Find out in detail how to revive your term insurance policy after it has lapsed. 

Good news! You can choose your premium payment term aka how long you’d like to pay your premiums. Depending upon your requirements, you can opt for

 

  • Single pay - Pay only once in the policy duration

  • Regular pay - Pay till the end of the duration

  • Limited pay - Pay only for a few years

 

Find out more about premium payment terms, the benefits of one option over the others and how you can choose the best term insurance premium payment term that works for your requirements.

Good news! You can choose your premium payment term aka how long you’d like to pay your premiums. Depending upon your requirements, you can opt for

 

  • Single pay - Pay only once in the policy duration

  • Regular pay - Pay till the end of the duration

  • Limited pay - Pay only for a few years


Find out more about premium payment terms.

Well, that's entirely up to you! You can choose to pay your term insurance premium annually, bi-annually, quarterly or even monthly. 

 

For example, if you are looking for an option that is light on your wallet, you can pay your premiums monthly. 

 

If you’re scared you may miss paying premiums on time and don’t mind shelling out a large  amount, you can pay your premiums once a year. 

 

Find out in detail which premium payment frequency you should choose. 

Follow these simple steps to ensure you don’t miss paying your premiums on time, resulting in a policy lapse - 

 

  • Set up auto-pay on your bank account or credit card to ensure you never miss out on your premium payment

  • Set payment reminders on your phone/laptop/email

  • Ask your family to remind you (after all, they will be the ones to suffer the most if your policy lapses!)

Yes, you can opt for the single pay premium payment term if paying a large amount at one go is not a problem for you. 
 

Yes, you’ll definitely avoid the risk of missing your premium payment. But remember, this fact should not be the main criteria for choosing single pay premium payment term. Your ability to pay your premiums on time should be the main criteria. 
 

You should choose it only if you have an irregular or cyclical income or you have a large sum of money from a one-time event, like ESOP payment, bonus, inheritance etc.
 

If you can’t choose single pay premium payment term, alternatively, you can also choose limited pay or regular pay, and still avoid missing payments by enabling auto-pay from your bank account or credit card.

No, for a normal term plan, you will not get your premiums back at the end of the policy period. But, if you have a TROP (Term Return of Premium) plan, you’ll get only your premiums back at the end of the policy period, if you outlive the policy. 
 

Find out more about TROP plans. 
 

You can also get your premiums back if you buy a zero cost term insurance plan. It allows you to exit the plan and refunds all the premiums you have paid, minus GST, at a certain point before your policy tenure is over.

No, you won’t get back your premiums if your term insurance policy lapses. And to make things worse, you will lose all policy benefits. Hence, consider reviving your term policy if it lapses. 
 

Find out more about reviving lapsed policies. 
 

All the more reason to ensure you don’t miss paying your premiums on time, right?

Typically, you’ll have to fill an auto pay mandate form to enable auto pay of your term insurance premiums. It is best to check with your bank for this process. 

No, they will not. Your premiums will only increase if you change the features of your policy after buying your term insurance plan (such as adding riders or increasing your life cover). 
 

Find out more about whether your premiums will increase after your first payment.

You can pay your term plan premiums online as well as offline as per your convenience. This is especially helpful if you are an NRI who has purchased a term insurance plan in India.  
 

It is best to check with your insurer on what payment methods they accept for your term insurance plan.

Being a freelancer, you may be having an irregular income. So, regular or limited pay premium payment terms may be difficult to sustain for you. 
 

You should consider choosing the single pay option. In this option, you can pay all your premiums at once and not worry about missing your premium payments for the policy in the future.

No, your insurer will not take any legal action against you if you do not pay your term insurance premiums on time. However, your term policy will lapse and you will lose all policy benefits.

Good question! If you’re an entrepreneur, it is not only your family but also your business and your employees (if any) who will be financially impacted by your unexpected demise. 
 

If you are not confident of remembering to pay your premiums on time, you can opt auto-pay from your bank for your premiums. In this way, your premium amount will be automatically debited when it’s due for payment, you don’t have to remember the premium payment dates. 
 

If you have irregular cash flows, consider opting for a single pay premium payment term to pay all your premiums at one go. 
 

But if that is not financially feasible, you can go for limited pay or regular pay premium payment term. The latter option can even give you the flexibility to change your policy benefits considering you’re more likely to stay covered longer than salaried employees. 
 

If you are choosing limited or regular pay premium payment term, you can pay your premiums annually to avoid the risk of missing premium payment. 
 

Or as a last resort, you can choose to pay it monthly/quarterly/half-yearly and enable auto-pay on your bank account or credit card to ensure you don’t miss the payment. 

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