Surendra Nath, owing to some financial difficulty, was not regular in paying his insurance premiums and, as a result, his policy lapsed. But Nath and people like him whose covers have lapsed need not lose hope as they can still revive it.

If a person forgets to pay his premium on the due date, any mode (quarterly, half yearly and annually other than monthly), he or she can pay within a 30-day grace period.

If the premium is not paid for six months, LIC [Get Quote] charges an 8 per cent interest on the premium (which depends on the duration and nature of the policy) for the deferred payment of the policy while the risk cover extends up to six months.

Simply put, it means a policyholder, who has defaulted on his premium payments for nearly six months and if an unfortunate development occurs, his life cover is still available.

The benefit is, however, only for those who regularly paid their premiums for a minimum of three years. In case, there is a person who wants to revive his or her policy in the seventh or eighth month, he will have to give a personal health statement.

Kotak Life Insurance offers a grace period of 30 days after the due date for paying the outstanding premium. If the customer fails to pay the premium within this period, the policy lapses. But the policy can be revived by paying the outstanding premium and 6 per cent handling charges. This facility is available for six months.

Kotak customers, however, can still revive the policy within five years from the issue date.

"But if a person is applying for a revival of policy in this period, then he/she shall entail submission of proof of good health and premiums will be recalculated," said Rahul Sinha, vice-president, marketing, Kotak Life Insurance.

According to an ICICI [Get Quote] Prudential Life Insurance spokesperson, the process for reviving a lapsed policy differs between unit linked insurance policies (ULIP) and traditional insurance plans. For ICICI Prudential, ULIP can just pay the premium due and the policy is reinstated.

For a traditional ICICI Prudential life policy there is a grace period of one month from the premium due date of the policy. After which the policy lapses and can be revived by paying the premium along with the applicable interest charges. Should the policy have been lapsed for more than six months, the life assured would once again have to go through medical tests.

For LIC policy holders, who have crossed the minimum three-year benchmark of paying their premiums regularly, there are three revival options available.

Suppose a person has defaulted in his premium payments for nearly two years, but is wondering how to scrap the lumpsum money towards premium defaults and interest payments on it. LIC offers a loan-cum-revival option.

In this option, the loan will be adjusted with the default premium and the person will have to pay the loan, which comes at an interest rate of 9 per cent. The interest on the loan is compounded at half yearly intervals and, therefore, works out cheaper than bank loans, said the LIC official.

The second option is called 'Survival Benefit-cum-Revival.' This is a money-back policy which has lapsed and the insurance holder wants to revive it.

The amount defaulted will be adjusted with the payment the individual is supposed to get at the end of the fifth, tenth or fifteen years. In this case, the maturity cover may reduce defaults but not the risk covered.

The last option available is 'instalment revival.' Suppose the insurance holder finds it difficult to pay a lumpsum money to revive his policy then convenient repayment schedules are available.

The amounts to be paid will, however, depend on the type of insurance policy, premiums to be paid and sum insured.

LIC policy holders, who do not fulfill the minimum three-year condition and have defaulted in premiums payments, need not lose heart, as there is a revival option called 'special revival' available to them as well.

The policy is modified (in terms, of the person age, premiums, the period of the sum insured) in manner that it is like going in for new policy. The premium payments will, however, be lesser than if he were to go for a new policy.

Sinha said lapses in life insurance policies are very small for the Kotak Life.

A senior LIC official said the incidence of policy lapses witnessed by the public insurer was larger being the largest player compared with private players, which have been in existence only for the last three to four years and, therefore, their lapse rate will be a fraction.

Sinha said if there was a long gap in reviving the policy, particularly for a high sum, the financial and medical certificates must be validated by the policyholder.

A senior LIC official said though the policy can be revived at all times, LIC advises its customers to revive their policy within five years or go in for new policy as it is detrimental to the customer.

Types of premium payments available

• All insurance companies advise their customers to pay their premium on time as there are various payment choices available now.
• Electronic clearing services. Customers can give a mandate so as to deduct the premium amount on a specified date and it automatically gets cleared.
• Insurers have tie-ups with banks so customers can also pay their premiums through bank accounts. In fact,  some banks are also offering payment of premiums through their ATM network.