What happens when you stop paying your life insurance premium? – Advisor Forbes INDIA


If you had to choose between planning today or tomorrow, choosing to plan today will always work in your best interest. Executing a plan ahead of time, like taking out a life insurance policy at an early age, gives you substantial long-term coverage. Investing in insurance also allows you to secure the certainties of life.

You can have sufficient funds to help you live comfortably in your golden years, manage higher education and child marriage, create financial liquidity for emergencies, through long-term and systematic wealth creation. You will only realize the true extent of the plan when it comfortably meets your needs. In such a scenario, your future self will thank you. Here’s why life insurance is essential and what happens when you stop paying the premium for your life insurance policy.

How Life Insurance Policies Can Protect Life’s Certainties

Just as you have different financial needs and goals, there are plenty of life insurance options to meet each one. You can choose a contract with a combined option, i.e. a single solution, which includes two or more life insurance plans, for example, life cover and an investment. Or you can choose a “Do It Yourself” (DIY) policy, in which you decide on the policy that best suits your needs and buy it online, after studying its characteristics, advantages, prices, duration and its endorsements.

Life insurance policies are either presented as pure instruments of protection or as a regular savings plan providing lifetime coverage.

  1. pure protection These plans cover you against the risk of losing your future income, in the event of death or disability. These are also available with additional built-in benefits or endorsements that cover you more for events such as accidental death and critical illness.
  1. A regular savings plan with life coverage which accompanies you with systematic and periodic savings towards a specific objective. Savings can be created through a multitude of options depending on your risk appetite:
    • Guaranteed savings, where you receive a fixed amount upon maturity or death
    • Savings with returns declared each year (as a bonus), depending on the performance of the company; once declared, this bonus is paid at contract maturity or upon death
    • Savings through investments in the debt and equity markets, such as unit-linked insurance schemes (ULIPs), where returns can be high or low depending on market developments

If you have a specific goal in mind, such as saving for your children’s education or building a home before retirement, purchase a policy that will provide payments to help you achieve that goal. After choosing the policy, be sure to opt for a premium payment period that matches your earning capacity and your ability to invest.

Once you have decided on the policy you are opting for and your end goal, ask yourself:

  • Can I pay the premium amount for the entire term of the policy?
  • What will be more feasible – a one-time premium payment or a monthly, quarterly or annual payment?
  • If I have to, for whatever reason, leave the contract before it expires, will I lose the money I invested in it?
  • If I am entitled to a payment, how much will they reimburse me and will it help me achieve my goals?

Make sure you understand the purpose of the policy, how it works, and the premium payment requirements before you make a purchase. Keep in mind that an insurance policy is a commitment you make to the company for a stipulated period. Whatever the policy, to reap the full benefits and ensure that your investment achieves its purpose, you must commit to the scheme and pay your premiums regularly.

Recognize this as an investment you are making to protect the future of your loved ones and yourself, committing to pay all premiums until the policy matures, to reap the full benefits.

Premium payment decoded

This simple chart will give you an overview of the different types of life insurance policies, what you gain when you pay your premiums regularly and on time, and what happens if you don’t. It also tells you how to renew the policy even if you missed a payment.

Paying premiums is always rewarding

Here’s what you stand to gain when you pay your premiums on time:

  • You and your family enjoy long-term financial security
  • The goals you saved for will be achieved
  • Some plans like ULIPs give you the benefit of positive market movement
  • Life insurance is the only investment tool that gives you a combination of equity and debt in the same product, as well as the flexibility to switch between fund options.
  • Returns are likely to outweigh inflation in long-term plans.
  • A partial withdrawal in ULIPs is possible after five years, which can be useful in the event of unforeseen expenses or emergencies
  • Some policies offer tax benefits
  • Bonus accumulation further expands the corpus for traditional (participating) plans
  • Returns are guaranteed regardless of market performance for traditional (non-peer) plans

Ways Insurance Companies Can Help

There could be many reasons for stopping bounties. When you retire, you may run out of money. Or a medical emergency could eat away at regular income. Even if it’s a short premium payment period, you can’t stop paying premiums because you’ve made a financial commitment to have policy benefits accrue for you.

Fortunately, insurance companies offer support to ensure your premium payments don’t suffer.

  • Changing the payment method: You can change the payment method if you find it difficult to meet the schedule described in the policy. IRDAI allows buyers to pay premiums up front in case they find it difficult later, especially as buyers approach retirement age.
  • Police reinstatement: All companies offer a raise feature if a bounty has been missed. There is a clear process here with the payment of expired premiums and recovery fees. IRDAI recently increased the recovery period to 3 years (for ULIPs) and 5 years (for traditional ones) as they understand the importance of continuing an insurance policy.
  • Medical exam: An inactive policy can be reactivated with minimal documentation. In some cases, a medical examination may also be required to restore original policy benefits.
  • Easy loan facility: A loan can ease the financial crisis. This will ensure the continuity of the policy. Some policies allow you to take out a loan even if payments have been missed; you can use it to pay the premium for a nominal fee. Some companies also have a loan stimulus program.
  • ULIP to the rescue: The companies also allow partial withdrawals from ULIP to fund your renewal premiums and continue your policy benefits after the completion of 5 years.
  • Pay in multiple times: There are also additional dunning programs offered by some companies, where a person who cannot pay all pending premiums at once, can pay in installments.

Insurance companies today offer every possible option to help ease your payment worries. You can choose to pay with options ranging from traditional check/sight draft methods to new payment gateways and wallets. There are also self-help options, which customers can access 24/7 to make payments easier.

It is better to pay than to delay

In addition to keeping your family safe, it’s financially beneficial to sue a policy once you’ve purchased it. Think of it this way, someone is sitting in the shade today because you planted a tree a long time ago and nurtured it every step of the way.

Continuing premium payments provide long-term financial protection, wealth creation, bonuses and long-term immunity to fluctuations in the investment market. Most importantly, it provides peace of mind to you and your loved ones.


Like your family, insurance is a long-term relationship. Paying the premium is a commitment you make to secure their future. Just as you put a sum aside to pay all your monthly expenses, in the same way you can set aside the premium payment and set a calendar reminder to make sure you never break your promise. It’s a simple solution that will benefit you and your loved ones.


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