What Happens If You Miss an LIC Premium Payment?

Every year I get calls from panicked clients: 'Ajay sir, I forgot to pay my LIC premium. My policy has lapsed. What do I do?' The good news: missing a premium is not the end of your policy. LIC has a very structured process for handling missed premiums, and in most cases, your policy can be fully revived.

Here is what happens at each stage after you miss a premium payment.

Stage 1, Grace Period (1 to 30 days after due date). LIC provides a grace period after the due date: 30 days for yearly, half-yearly, and quarterly modes, and 15 days for monthly mode. During this grace period, your policy remains fully active. You can pay the premium without any penalty, and your full cover continues. If you missed the due date but remember within 30 days, simply pay the premium, nothing changes.

Stage 2, Lapse (after grace period ends). If the premium is not paid within the grace period, the policy lapses. The death benefit cover stops. However, if you have paid premiums for at least 3 years (in most LIC plans), the policy acquires a 'paid-up value', a reduced cover that continues automatically even without further premium payments. This paid-up value is a fraction of the original sum assured, proportionate to the premiums already paid.

Stage 3, Revival (within 5 years of lapse). LIC allows lapsed policies to be revived within 5 years of the first missed premium. To revive, you pay all outstanding premiums plus interest (typically 8 to 9% per year on the outstanding amount). For policies lapsed for more than 3 years, you may also need to submit a health declaration or undergo a medical test. Once revived, the policy is fully restored to its original terms.

Stage 4, Surrendered or permanently lapsed (after 5 years). If the policy is not revived within 5 years, it is permanently lapsed. If it has a surrender value (typically after 3 years of premium payment), you can surrender it and receive the surrender value. This is usually 30 to 50% of the premiums paid, significantly less than what you paid in. This is the scenario to avoid.

My strong advice: set up an auto-debit or standing instruction for your LIC premium on your salary account. Most premium lapses happen because of oversight, not inability to pay. A missed premium due to forgetfulness can cost you years of accumulated bonuses.

If your policy has already lapsed, call me at 9415313434 immediately. In many cases I can help you handle the revival process and restore your full cover.