Since the start of the COVID-19 pandemic, the Indian masses have increasingly focused on life insurance products, with many young citizens purchasing life insurance coverage for the first time. Despite this, aggregate data from private insurance companies suggests that nearly 29% of the insured base have lapsed policies due to non-payment of the insurance premium on time. This is largely attributed to a general lack of awareness of the importance of paying premiums on a timely basis rather than the financial stress that prevents them from continuing their insurance plans.
Let’s take a look at some steps that should be taken to ensure that you continue to enjoy the myriad of guarantees that are built into life insurance plans.
Tracking your policy’s premium payment date is the first step in ensuring your life insurance plan does not expire. You can choose to pay up to 30 days before the policy expires, but you must not delay more than 30 days after the due date. Your insurer or agent would do their part to let you know of this date by mail, phone, email, SMS, or other preferred modes, but it would be advisable to set an automatic reminder for an added safety net.
If your premium is more than 30 days late, call your supplier immediately and make payment early to avoid additional penalties. According to IRDAI standards, for premium payments received after the policy matures, interest of 9% per annum is charged on the premium amount from the due date and added to the overdue amount. After clearing this accumulated premium amount, the insurance plan will be reinstated by your provider and should be confirmed in the form of a revised policy document. For ULIP holders, if payments are not made even after 45 days from the due date, it will result in premature closure of the plan with considerable financial impact in addition to the removal of coverage from assurance.
If you have not renewed your policy even after 180 days from the expiration date, the insurer will ask you to submit a declaration of good health along with a completed COVID questionnaire. For those with existing health concerns, there may be an excess requirement to undergo medical tests and procedures to re-check your current level of fitness. In some cases, the premium may be revised based on the results of these tests and policy coverage will not be reinstated until the new premium amount has been paid.
Setting up automatic payments is highly recommended to enjoy complete peace of mind and ensure you don’t experience any of the above inconveniences. This can be done by enabling the automatic payment option through your insurer’s web portal and can be configured with several payment options including Net Banking, digital wallets, UPI apps, and credit / debit cards. With this feature, the premium amount is debited from the respective account / wallet on the due date and allows you to continue enjoying full policy coverage without last minute hassle. Only in the event that sufficient funds are not available will the automatic payment route fail and trigger a message on your registered email id for further action.
If done on time, your life insurance plan will continue to provide your loved ones with a safety net to fall back on when needed. It is therefore important to adopt a long-term mindset when choosing a life insurance product and this requires maintaining basic discipline in terms of paying premiums and medical reports.
(By Subashish Acharya, Director of Distribution, Future Generali India Life Insurance Company Ltd)