Simplifying Life Insurance in India
What is Reinstatement of Life Insurance Policy & How to Reinstate Policy in India?
Table of Contents
What is Policy Reinstatement in Life Insurance?
When you buy a life insurance policy, you must pay regular premiums (monthly, quarterly, or yearly). If you miss paying these premiums for a specific period, the policy becomes lapsed or inactive. This means the insurance coverage is no longer in force, and the insurer won’t pay the sum assured in case of your unfortunate demise.
Instead of buying a new policy, the person can reinstate life insurance by reviving their lapsed policy by paying the pending premiums, along with interest or late fees, and submitting necessary documents as per the insurer’s rules.
Most insurance providers offer a reinstatement option for lapsed policies, typically within a window of 2 to 5 years from the date of the first unpaid premium.
When Does a Life Insurance Policy Lapse?
A life insurance policy lapses when the policyholder fails to pay the premium within the due date and the grace period provided by the insurer. Most insurers offer a grace period of 15 to 30 days after the premium due date. During this time, the policy remains active, and the policyholder can still make the payment without losing coverage.
There can be many reasons why someone may miss paying life insurance premiums:
- Missed reminders due to a change in phone number or address.
- Insufficient funds in the bank account for auto-debit.
- Financial hardship or temporary loss of income.
- Neglect or oversight, especially with long-term policies.
- Lack of awareness about the grace period or due dates.
Once a policy lapses, the insurer is not obligated to pay any claims, and the policyholder must go through the reinstatement process to restore coverage within the reinstatement period or purchase a new policy.
What is the Reinstatement Period in Life Insurance?
The life insurance reinstatement period, also called the revival period, is the time frame during which a policyholder can reactivate a lapsed life insurance policy. This period begins after the grace period ends, which typically lasts 15 to 30 days, depending on the payment frequency.
Most insurers in India allow reinstatement within 2 to 5 years from the date of lapse, though the exact duration varies by insurer and policy type. During this time, the policyholder can apply to revive the policy by:
- Paying overdue premiums with interest or late fees.
- Submitting a revival application.
- Possibly undergoing a medical examination, depending on the insurer’s requirements.
If approved, the policy is reinstated with the same coverage and benefits, although some insurers may impose waiting periods or exclusions for claims made shortly after revival.
How Can I Reinstate My Lapsed Life Insurance Policy?
If your policy has lapsed due to missed payments, you can reinstate life insurance by following a few steps. Here's how it usually works:
Check the Reinstatement Period
Check the Reinstatement Period to ensure your policy is still within the allowed time for revival.
Contact Your Insurer
Contact the insurer and inform them you want to reinstate your policy.
Pay Overdue Premiums
Pay all overdue premiums, including any interest or late fees.
Submit Health Information
Submit your health details, either a declaration or a medical test, depending on how long the policy has been inactive.
Review, Approval & Policy Reinstatement
After submitting your application and health details, wait for the insurer to review it. Once approved, your policy will be reinstated with its original coverage and terms.
Documents Required for Reinstatement of Life Insurance Policy
To reinstate a life insurance policy, you’ll need to submit a few essential documents. These help the insurance company check your eligibility and process your request smoothly. The exact list may vary slightly depending on the insurer and how long the policy has been inactive, but here are the most commonly required documents:
Original Policy Document
Reinstatement Application Form
Identity Proof
Address Proof
Medical Reports (if required)
Payment Receipts
Income Proof
How Much Does Reinstatement of a Life Insurance Policy Cost?
The cost of reinstating a lapsed life insurance policy typically involves several financial components. While the exact amount varies from insurer and policy type, the total cost generally includes:
- Interest Rates: The interest rate on overdue premiums is typically outlined in your policy’s terms. A standard rate is 6-9% per annum.
- Medical Tests: If the policy has been lapsed for a long time (typically over 6 months to a year), insurers may require medical tests to reassess your insurability. These tests may be free or chargeable, depending on the insurer.
- Health Changes: If your health has declined significantly since the policy was first issued, the insurer might still offer reinstatement, but could require higher premium payments than you were initially paying.
To get the exact amount you would owe, you must contact your insurance company directly. They can provide a formal calculation of all back premiums, the applicable interest, and any fees.
Example of How Reinstatement Costs are Calculated
If you missed 2 years' premiums of ₹8,000 p.a., for a sum assured of 1 crore, and the insurer charges a 9% annual interest on pending premiums, the calculation would be:
- Pending premiums (2 years): ₹8,000 × 2 = ₹16,000
- Interest: 16,000 × Number of years overdue × 9% = ₹2,880 (excluding medical fees)
- Total Revival Amount: ₹16,000 + ₹2,880 = ₹18,880
How Long Does the Life Insurance Reinstatement Process Take?
1. Simplified Reinstatement (No Medical Examination)
- This is a quicker process, often completed within 7 to 15 days or a couple of weeks.
- It applies when the lapse period is short and the insurer does not require a reassessment of your health.
- You’ll typically need to submit a reinstatement application, pay overdue premiums, and possibly settle any policy loans or withdrawals.
2. Full Reinstatement (With Medical Examination)
- This process takes longer, usually 2 to 4 weeks or more, depending on how quickly medical reports are processed.
- If the policy has lapsed for an extended period. The insurer needs to reassess your health risk before approving reinstatement.
- Once the medical tests are completed, the insurer reviews the results to determine your eligibility and may adjust the premiums accordingly.
What Happens to Your Policy Benefits After Reinstatement?
When you reinstate a lapsed life insurance policy within the allowed time frame (typically 2–5 years), most insurers aim to restore the original policy terms.
This generally includes the sum assured, the premium rate (provided your health status hasn’t changed), any applicable riders and bonuses, as well as the policy tenure and maturity benefits.
This means you don’t lose your accumulated benefits, and you don’t need to reapply for a new policy, which could be more expensive. However, depending on your situation and the insurer’s underwriting process, some changes may occur:
Premium Loading
If your health has worsened, insurers may increase your premium to reflect the higher risk.Exclusions
Certain health conditions or lifestyle changes (e.g., smoking, high-risk occupation) may lead to exclusions in coverage.Waiting Periods
Some insurers may impose a short waiting period before claims are eligible again, especially for health-related policies.Updated Terms
If there have been regulatory changes or updates in the insurer’s product structure, your reinstated policy may reflect those changes.
What Happens if Policy Reinstatement is Rejected?
Sometimes, after applying for reinstatement of a lapsed life insurance policy, the insurer may reject the application for several reasons. Here is what typically happens:
- Your life insurance policy remains lapsed and inactive
- The insurer will send you a formal rejection letter, explaining the reason for rejection
- You will not be entitled to any benefits under the policy, and no claim can be made
- The premiums you paid during the lapsed period are usually not refundable
Why Do Insurance Companies Reject Reinstatement?
Due to Health Issues
If your health has worsened since the policy lapsed, the insurer might not be able to approve your policy revival.Missed Reinstatement Window
You can only revive your policy during the reinstatement period (usually 2-5 years). After that, the policy stays lapsed.Incomplete or Incorrect Information
Giving false information or missing essential documents is a big reason for rejection. Make sure everything is correct!Unpaid Premiums and Dues
The insurer can't revive your policy until all your missed premiums and interest are fully paid.High-Risk Lifestyle Changes
If your job or habits have become riskier (like smoking or dangerous sports), the insurer might decline your request based on the higher risk.
Can I Apply for a New Policy If Reinstatement Is Rejected?
Absolutely. If reinstatement is not possible or rejected, your only option is to apply for a new life insurance policy. Keep these points in mind:
- The new policy will have new terms
- The sum assured may be different
- You’ll have to undergo medical tests again
- The new policy may cost more if your age has increased or your health has deteriorated.
Alternatively, you can choose from term, endowment, or ULIP plans based on your needs.
Life Insurance Options to Explore
Reinstatement vs New Policy: Which is Right for You?
If your life insurance policy has lapsed, you have two options: reviving the old policy or applying for a new one. Understanding when each option makes sense can help you make the right decision.
If your previous policy was well-suited to your needs and reinstatement is affordable, it’s often the smarter choice. But if your needs have changed or better options are available, exploring a new policy could be worth it.
Difference Between Life Insurance Renewal and Reinstatement
Here’s a simple table comparing Renewal and Reinstatement in life insurance:
Benefits of Reviving a Lapsed Life Insurance Policy
Continue Your Financial Protection
When you reinstate your policy, your life insurance coverage becomes active again. This means your family remains protected, and in case of any unfortunate event, they can still receive the sum assured.Avoid Starting a New Policy
Instead of applying for a brand new policy (which may require fresh medical tests and higher premiums due to age or health changes), reinstating allows you to continue your existing plan with the same sum assured and terms.Retain Original Premium Structure
If reinstated within the allowed time, your policy will typically continue with the same premium amount you were paying earlier. This helps you save money compared to buying a new policy later, which may cost more due to increased age or health condition.Preserve Policy Benefits and Bonuses
For policies with additional benefits like loyalty bonuses, accrued returns, or riders (like a critical illness rider), reinstatement ensures you don’t lose these benefits. They will continue as per the original policy terms.Avoid Fresh Medical Tests (in Some Cases)
If your policy is reinstated quickly after lapse and your health hasn’t changed significantly, insurers may not require new medical tests. This makes reinstatement easier and quicker.
Tips to Avoid Life Insurance Policy Lapse in Future
Here are quick tips to avoid your life insurance policy from lapsing:
- Set up auto-debit for premium payments.
- Use calendar or phone reminders for due dates.
- Keep your contact details updated with the insurer.
- Maintain enough balance in your bank account.
- Pay within the grace period if you miss a due date.
- Review your policy once a year.
- Talk to your agent if you face financial issues.
Reinstating a lapsed life insurance policy is possible and often advisable compared to starting a new one, especially if you value the original benefits and sum assured. The process is straightforward if you follow the insurer’s guidelines, pay pending premiums, submit documents, and undergo medical tests if required.
Always act quickly before the reinstatement period expires and keep your contact details updated with your insurer to receive timely reminders. By understanding the process in detail, you can make informed decisions and keep your life insurance coverage intact for your and your family’s peace of mind.
FAQs about Reinstatement of Life Insurance Policy
Can I reinstate a life insurance policy after 5 years?
Do I need to undergo a medical test for reinstatement of a life insurance policy?
What happens to bonuses if the life insurance policy is reinstated?
Is there a difference between revival and reinstatement?
Will my premium change after reinstatement of the life insurance policy?
Can all types of life insurance policies be reinstated?
Can I reinstate my life insurance policy online or do I need to visit a branch?
Do I need to pay interest on overdue life insurance premiums?
Will my life insurance riders and bonuses be reinstated, too?
What happens to nominee rights during the reinstatement of a life insurance policy?
Can I reinstate a life insurance policy through a third-party agent or only directly?
Do life insurers offer grace extensions or revival campaigns?
What if I had a life insurance policy loan before the lapse?
Can the reinstatement of a life insurance policy be rejected even if I meet all conditions?
What are the hidden costs of life insurance reinstatement?
Can I change the sum assured or add/remove riders at revival?
Can I make a life insurance claim for a death that occurred during the lapse period?
I was diagnosed with an illness during the lapse. Can I still revive?
Are medical test fees refundable if my revival is declined?
Can NRIs/overseas policyholders revive a life insurance policy while abroad?
What disclosures do I need to make for reviving a life insurance policy?
What proofs should I keep after reviving a life insurance policy?
Other Important Features of Life Insurance
Latest News
Read More