How do I reactivate an insurance policy after it expires?

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I took out a traditional 10-year insurance policy in 2015. I paid the premium for the first five years but couldn’t pay for the last two years. Can I start paying the premium now? Has the policy expired? What happens if I don’t pay premiums on time in the future?

—Name withheld on request

Insurance companies give a grace period of up to 30 days from the policy renewal date to pay the unpaid premium. Beyond that, if the premium is unpaid, the contract is considered null and void.

However, expired fonts can be reactivated. A policy can be revived by paying past premiums and additional charges levied by the insurer.

Often, insurers offer special programs or campaigns to revive expired policies. In such schemes, they usually waive any penalties or additional charges.

If you don’t want to pay premiums in the future, you can also surrender the policy. By now, your policy would have acquired cash value.

I am 35 years old and recently purchased term insurance. I recently read an article that said banks can claim your assets if there are any outstanding loans – whether auto, home, or personal loans – despite term insurance. I would like to know if there is a way to ensure that the banks will not be able to claim any amount received by my nominee in the event of an untimely death?

—Name withheld on request

Banks or lenders can become beneficiaries of a term plan only if you assign the life insurance plan to them. The process of transferring your rights to another person or entity is called an “assignment”.

Assignment is common for large loan amounts, where you as the policyholder assign your life insurance policy to the bank(s). However, in the absence of an assignment, the bank can only assert its right to the proceeds through legal proceedings by seizing your estate to recover the loan.

As for a married woman, the amount can be secured against financial creditors by purchasing the policy under the Married Women’s Protection Act. Proceeds from these policies would then belong solely to the wife.

Abhishek Bondia is Senior Director and Managing Director of SecureNow.in.

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