The IRDAI (Insurance Regulatory Development Authority) has, at the behest of the Life Insurance Council, instructed Life Insurers to extend the grace period for the payment of all renewal premiums that fall between 8th November and 31st December 2016 by an additional 30 days. ‘Grace Period’ is a time window (15 days for monthly mode policies and 30 days for others) that is provided to policyholders to make their renewal premium payments.
This decision has been taken in the light of the recent demonetization of Rs. 500 and Rs. 1000 notes, which has resulted in a severe liquidity crunch for many individual policyholders who would normally pay their premiums in cash. The IRDA has clearly stated that this is a “special, one off dispensation”.
Revivals of lapsed policies can lead to the policyholder having to incur additional charges such as penalties and interest. In addition, some policyholders may be required to go through the cumbersome medical underwriting process too. Also, worth noting is the fact that Death Claims arising from lapsed policies are invalid; thereby rendering the entire act of buying life insurance moot in the event of an unfortunate loss of life after a policy has lapsed. Policyholders are well-advised to continue paying their premiums and keep their policies in force at all times to derive the real benefits of transferring risk to an insurer.
Annual Mode Renewal Premium payments due on 31st December can now be made as late as 30th January 2017. This is a welcome measure taken by the IRDAI in the interest of policyholders.
In a quick follow-up to the first circular, the regulator clarified that they have in fact not instructed Life Insurers to accept Rs. 500 and Rs. 1000 notes, contrary to rumours. “The above circular does not mention acceptance of the said old notes and it merely extends the grace period of the policies issued”, the follow up note on the IRDAI website clarified. Policyholders are advised to make note.
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