Renewing your Life Insurance Policy is a must
On November 20, 2016, the country woke up to one of its worst rail disasters when the Indore-Patna Express train derailed in Kanpur Dehat district of Uttar Pradesh in which as many as 142 people were killed and more than 200 injured. Amongst the passengers who lost their lives, few were insured with Bajaj Allianz Life Insurance. One of the deceased passengers who was a Bajaj Allianz policyholder had paid only one annual premium. He had not renewed his policy which was due for renewal on August 17, 2016; neither had he paid the premium during the 30 day grace period from the date of renewal. The mishap occurred on November 20, 2016, and since his policy had already lapsed, his nominee was paid the available account value of Rs. 4, 49,000. However, had he renewed the policy within the stipulated time period, the nominee would have received the full sum assured of Rs. 50,00,000 in his policy. This is a grim reminder to all those who do not keep their policy in force by paying regular premiums and as a result their dependents are deprived of the full sum assured in the event of such unfortunate occurrence.
A life insurance is a contract, between you and your insurer, under which you will pay the premiums regularly for a certain period of time and in return, the insurer will provide financial security throughout this period. Life insurance is one of the most important risk protection tools, especially during uncertain times and failure to keep this contract in force has an adverse impact on the beneficiaries and dependents of the policyholders. A life insurance policy is supposed to have lapsed when the customer does not pay the renewal premium within the specific time period. Typically, the insurer sends a reminder and gives a grace period of a month, during which the life insurance cover is still active. However, once the grace period is over, the insurance cover ceases. Traditional policies like endowment plans, term insurance and whole life insurance can be revived. This, however, does not hold true for a single premium policy, since the entire amount is, by definition, paid up front in a single instance. The Insurance Regulatory Development Authority (IRDA) has recently come up with a new regulation, which allows investors to revive their lapsed ULIP within two years from the date of discontinuation of the premium payments, no matter when the lock-in period ends.
Non renewal of a policy defeats the basic purpose of buying insurance, as it leads to loss of life cover and suspension of other policy benefits. Insurers, today, are adopting innovative techniques to make sure that the customers renew their policies on time and do not lose out on benefits such as continuance of life cover, tax advantages, and other benefits. They ensure that a timely communication via e-mails, SMS, IVRS, calls, letters, etc., is sent, informing the customers about their renewal due date. These days, insurers are also making it a point to improve their distribution network and introduce multiple touch points by adopting technology. This is a significant step forward since it creates ease of renewal payment, creating a better experience for the customer.
The industry in the recent past has also seen a series of revival campaigns, which encourages customers to renew their lapsed insurance policies by extending special benefits. Such campaigns offer to renew lapsed policies which fall under their prescribed revival period. Special benefits such as a partial waiver of interest amount on Traditional Policies, relaxed underwriting norms by simplifying the DGH (Declaration of Good Health) form and waiving medicals for some policyholders are extended under such campaigns.
Some of the ways in which a policy holder could ensure that he’s diligent in the premium payments include opting for Electronic Clearing Service (ECS), pay premiums through bank ATMs, opting for auto-pay service through your credit card, activate email-alerts and SMS-alerts etc. One of the most important points that one must keep in mind is that most companies prefer to send premium reminders on postal address; therefore updating your postal address (if need be) from time to time in order to receive the letters of premium that are reminders from you insurer.
It is therefore in the interest of those who have taken a life insurance policy and care for their dependents to prevent against lapsed policies. This way they can claim the benefits for which a life insurance policy is taken i.e. “protection” for their near and dear ones.
Source: Deccan Herald