When do insurance policies lapse?

A policy holder has to pay the fixed premium within the due date. You will typically get a grace period of 30 days to pay it without a fine and if you fail to pay the amount by then, the policy will lapse.

What happens when your insurance lapses?

Term Plan: You will lose the premium paid as well as the benefits of the insurance.

ULIP: In the case of Unit Linked Insurance Plans if you stop paying the premium before the completion of the lock-in period of 5 years, your policy is considered lapsed. You will lose insurance benefits but the amount that you had paid previously will move to a discontinuance fund that will be payable to you after the completion of the five-year lock period. You will also be charged a discontinuance fee which will be as high as Rs 6,000 in the first year and Rs 2,000 in the fourth year.
If you miss on paying premiums after 5 years, you can either:

1. surrender the policy and take the investment corpus
2. revive the policy
3. convert it into paid-up policy where you can continue with it for a reduced 'sum assured'

How to Revive the Lapsed Policy?

You are given 2 years to revive lapsed policies. You will have to pay all the due premiums along with the penalty interest.

In the case of ULIPs, the discontinuance charges will be reversed.

Rules for the revival of an insurance policy is relaxed on a case-to-case basis. It will depend on how long it has been since your policy lapsed, your health condition, your age, the extent of insurance cover, etc. You may be asked to submit medical test reports depending on the case.

If you revive earlier, like within 6 months, the conditions will be easier. After 2 years, it will be difficult to request for a revival.