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I am 35 years old. Due to certain reasons, I lost my job recently. What will happen if I am not able to pay the premium due this year?

—Name withheld on request

 

I am assuming that your question is about life insurance. When a premium remains unpaid, the policy benefits cease to be in force. However, you will have several options when you are ready to pay premiums again. Your current insurer would give you an option to revive the old policy. To revive the policy, you will need to pay all unpaid premiums along with interest and other administrative charges that the insurer may levy. The insurer may require a good health declaration or a medical check-up based on the sum assured. The principal advantage will be that the old premium rate will apply to the remainder of the policy term.

If your current policy lapses, you could also buy a fresh term plan when you have the funds. You will have to go through the standard medical underwriting process and pay the premium applicable for the current age. You will however have no liability for the overdue premiums. Since term plans do not have any waiting period except suicide for the first year, your policy benefit will be similar. So, you could choose the option that is more cost efficient for you.

 

An insurance agent is asking me to buy a personal accident cover. Currently, I have health insurance and a term insurance policy. So, my question is that is there a need to buy a personal accident cover? Will it not be covered under term insurance?

—Name withheld on request

 

A term plan covers both accidental death and natural death. An accident plan covers only accident-related death and disability. Further, an accident plan also has certain exclusions such as unlawful activities and adventure sports. So, a term plan is certainly the more comprehensive death benefit cover. However, an accident plan also covers various types of disabilities due to an accident. Disabilities could be permanent or temporary, and partial or total. In case of such an accidental disability, the insurance pays the fixed benefit amount linked to that disability. A sum assured of 10 times of annual income is recommended for term life. However, for an accident plan, you could consider a sum assured of one to two times of annual income. The price of an accident plan is cheaper.

Abhishek Bondia is principal officer and managing director, SecureNow.in.

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