Mr. T.R. Ramachandran CEO & MD, Aviva India
In Insurance parlance, reinstatement is the process of bringing an inactive life insurance policy to its original active state. Typically, policies that are paid-up, in lapsed state or in a discontinuance mode, can be reinstated.
Once a policy lapses, a customer is neither entitled to life cover nor surrender value. On the other hand, a policy becomes paid-up if one stops paying premiums after the pre-requisite number of years.
In paidup state, the life cover reduces usually in proportion of premiums paid to premiums payable, and the surrender value is payable in case of termination of the policy.
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| Mr. T.R. Ramachandran CEO & MD, Aviva India |
A lot of people let their policies lapse or terminate it once it enters the paid-up state, not realising the disadvantages of the step. An insurance policy is a longterm protection product and one must keep it active for the entire policy term to avail all the benefits.
If not reinstated within a definite time period, one stands a risk of losing all premiums paid. Moreover, most applicable charges are deducted in the initial years. It is hence, advisable to reinstate a policy.
Also, if you buy another policy with a similar life cover, you will have to pay a higher premium due to your increased age or changing medical conditions. One can reinstate a policy by paying all outstanding premiums alongwith the processing fee and interest rate as per the policy terms and conditions.
For Ulips, interest is usually not charged. You may be asked to submit a declaration or / evidence of good health, that is, the insurer may ask you to appear for a medical test before the policy can be revived.
This is done to ascertain whether there has been a change in health status or / insurability. Depending on the findings, an insurer may take a decision to accept the revival without a change in terms & conditions, increase the premium, or / even decline the revival of the policy.
Insurance companies usually allow a time period of up to 5 years during which you can reinstate your policy.
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