The worst thing for any insurance holder could be if he fails to pay premium due to any reason and then his policy lapsed. Many times you might not be able to pay your premium amount on time due to financial crisis or something like that. Usually company sends a reminder to you regarding your due date but if you fail to do pay on due date then your policy will lapse.
But thanks to IRDA Or Insurance Regulatory and Development Authority, they had introduced new rule which provide more freedom to investors. As per this new rule you can now revive a 2 years lapsed ulip policy. So if you had not paid your premium on time even after getting notification from company then also you can save your plan by paying premium within 2 years.
What It Means?
It means that if you fails to pay your premium on due date then you can revive a lapsed ULIP (Unit-Linked Insurance Plan) policy within two years from its premium due date. Means now you get more time to save your ULIP from being lapsed.
If you are having some irregular or seasonal incomes then this change can bring happiness to you as you will get 24 months to save your plan.
What Are The Previous Rules ?
As per previous rules if you fail to pay your ULIP premium on time then company will provide some grace period, may be of 50-60 days, and if you still wont pay premium then your policy will lapse. If you had ULIP for mandatory period of holding, then you will get your payout but if you had not finished the mandatory period of five years then you will not get payout.
Then Insurance company will put you money in discontinued policy fund till your money become eligible for payout after 5 years. Once it become eligible then payout is done to you.
So What Are New Rules?
As per new rule you can revive or save an 2 year old lapsed ULIP policy as against 50-60 days of today, but there are some rules too :-
- This is only applicable to policies taken after September 1, 2010 only,
- This will be effective after 1st November 2011
- The policy should not have completed mandatory period of 5 years. If it has reached 5 year lock period then you are not eligible for this
So What’s More?
As per old rule money laying in discontinued policy fund will earn 3.5% per annum for you but now as per new rule it will give return equals to the interest paid by SBI on Saving Accounts, currently SBI is paying 4%, it will be paid as on November 1, 2011.
Now one more thing, As per this new rule of IRDA insurance companies are free to set Fund Management Charges (FMCs) upto 0.5%, earlier there were no Fund Management Charges from company. As companies are managing your funds for 2 years they can charge a little amount from you.
So if you had irregular or seasonal incomes then it could help you a lot to save your policy and get lots of time to pay your premium.