An LIC policy is considered to be lapsed if premiums are not paid within the grace period set by the company. If a policy is lapsed, the coverage become void until it is revived by the policyholder. LIC allows different types of revival options for policyholders to activate their policies. In case of revival, a fresh contract is issued to the policyholders and the insurer has the right to impose new term and conditions. The different types of revival options available under a policy can be listed as follows:
1)Ordinary revival: This type of revival must be done within six months from the expiry date. This can be done simply by paying the outstanding premium amount along with the accrued interest amount. There is no need for a personal statement of health when it comes to ordinary revival.
2)Revival on non-medical basis: This is applicable in case of non-medical assurance policies taken by an individual. Here, the amount to be revived should not exceed the prescribed limit set by the company for non-medical assurance.
3)Revival on medical basis: This option can be used only if the policy cannot be revived by the two options mentioned above. Here, the policyholder has to undergo medical tests depending upon the sum insured amount. The revival of the policy will be decided based on the outcome of medical tests.
4)Special revival: This type of revival can be done if the policy is lapsed for more than six months and less than three years. This involves shifting the original date of commencement of the policy by a maximum of two years. The premium might change since a fresh contract is issued here. Also, the policyholder must submit a medical report regarding his/her health status.
5)Installment revival: This can be done if the policyholder is not in a position to pay the entire outstanding premium in lump sum. This shall be be applied only if the outstanding premium is for more than one year.
6)Loan cum revival: In this type of revival, the outstanding premium amount is collected from the amount available as loan under the policy. If the loan amount is insufficient, the policyholder must pay the balance amount. If the available loan is higher than the outstanding premium, the remaining amount will be paid to the policyholder.
7)Survival benefit cum revival: This is applicable to money-back policies. Here, the amount available as survival benefit can be used to revive the policy.
Financial Analyst at Farmer's Insurance