- Lapse Policy : A policy turn to lapse status when policyholder fails to pay premium on due date of premium and even post grace period. Grace period is 30 or 31 days after due date. Insured won’t be receiving any benefit from insurance company once policy become lapse. Lapse policy can be revived within 5 years from the date of last unpaid premiums provided the policyholder has to pay all the outstanding premium along with interest charge.
- Paid Up : Once an insured pays full premium for 2 or 3 years, surrender value gets acquired. Post acquiring surrender value, if an insured stops paying premium then policy turns to paid up. Once policy becomes paid up, Sum Assured gets decreased. Paid up Sum assured is calculated as No of premium paid/No of premium payable * Base Sum Assured. For Ex. If Base Sa is 2 lakh and policy term is 10 years and Policyholder pays premium for4 years , then paid up value will be calculated as 4/10*200000 . Paid Up Sa will be 80 thousand . Paid up policy can be revived within 5 years from the date of last unpaid premiums provided the policyholder has to pay all the outstanding premium along with interest charge.
In case of Unit linked plans, there is lock-in period of 5 years, once an insured discontinue his payment post paying for full 5 years, then a policy is eligible for paid up.
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