Investment Options

It’s Time to Wake Up

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If you don’t buy new clothes it will work but if you don’t pay your credit card bill then it can have an impact on your credit score. If you don’t pay your electricity bill, then your lights could get turned off. If you don’t pay your life insurance premium… well it’s a warning signal.

The fact is that not paying your premium on time can have a devastating effect on both yourself and your family. “Lapse” is one word you never want to hear from any of your life insurance providers.

As a family man, Ravi has dependents. To secure the financial future of his family, he did the right thing by buying life insurance. He bought 3 policies at different stages of life when he got married, when he had his first child and the third after your second child was born. All the plans he bought has a 30 year term and he bought them from different life insurance providers. Why 3 different providers? It’s simple: he bought these plans at different stages of his life and at different premium rates, because every time he wanted to buy, a different life insurance provider came back with a cheaper option.

Having three policies from different providers meant he had to keep track of when to pay the premium because all of them had different due dates. The last policy he took was a 1 crore term life insurance policy and he was considering dropping the smallest one of the three, the 10 lakh term policy. He told his wife that whenever the bill comes in for the 10 lakh term policy, to go ahead and let it expire.

What he missed doing was explaining to her which policy was which. Turns out she let the 1 crore term policy lapse instead of the 10 lakh. What made matters worse was that he didn’t notice this error till several months after the due date.

By God’s grace he was in good health. He knew if he did have to reapply for insurance, that he would get it easily. But, he also knew that it would take some time to go through the medical tests again. Hoping that there was a quick solution, he got on the phone and called the insurance provider immediately. He was thrilled when he came to know that reinstating the policy was really simple.

While on the phone with the customer service representative he learned that most insurance companies provide a grace period if you miss your premium payment. The grace period is usually 30 days after the premium due date. Since it had been more than 30 days since my premium was due, he missed the graced period and his life insurance policy had officially lapsed.

Ravi had to request the Reinstatement of his policy by filling up a simple form which asked some basic medical questions to make sure that his health was still intact. It was now that he realized that Reinstatement could be a major issue for someone that already had pre-exisiting medical conditions another reason to never let your policy lapse.

After filling out the form and making the premium payment, his policy was reinstated after the company reviewed my request.

There are plenty of things that can go wrong in life, but letting your policy lapse should not be one of them.

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