Most of the times, when we purchase an item which does not meet our expectations, we exchange or return it. Sometimes, if we are lucky, we get a refund or credit in its place. Unfortunately, in the case of a life insurance policy, these options are not available.  Since, in India, insurance policies are purchased through agents, mis-selling is common. Every insurance company is mandated to offer a policy holder 15 days within which they can return the policy,  but this option is not actively used. Most policy holders do not read the fine print and don't realize that the plan they've bought is unsuitable until they have paid a few premiums for it. The result is a dis-heartened policyholder who doesn't pay premiums leading the policy to lapse.

Simply put, a lapsed insurance policy means that insurance will not be available to protect the financial interest of the dependants in the event of the death of the insured. But a lapsed insurance policy is not a futile situation to be in. Depending upon the length of lapsation and the type of policy in hand, most insurance companies offer scope for revival. 

In order to revive your lapsed insurance policy, you need to pay the unpaid premiums along with the interest. In some cases, you may also have to undergo health checkup. Revivals can be placed in three buckets. The first is an ordinary revival, if your lapsation has not extended over 6 months, you pay your premiums and interest without any personal statement on the condition of your health. The rate of interest in this case is decided by the insurer.

The second is revival on non-medical grounds. This is applicable if the sum to be revived is lesser than the approved limit for non-medical assurance purchased by the life assured. The third option is revival of medical grounds, which is applicable if the previous two options do not apply. Here the policy holder needs to undergo medical tests post which will decide the sum assured.

Revival of a life policy is as good as purchasing a new policy. The insurance policy holder needs to submit the relevant documents requested by the insurer. The company will then gauge risk, determine rate and decide whether to accept or reject the request for revival.

You can easily prevent your policy from lapsing. Most insurance companies send regular emails and sms's remind policy holders about their premium payment date. Make sure to keep your contact details updated with the company to avail this facility.

If a lump-sum annual payment poses a problem, you can also look at changing the frequency to monthly or quarterly payments for your premiums. This may increase the premium slightly, but it is still manageable. Alternatively, you can also opt for ECS which mandates your bank to make the payment for you when it's due.

It is essential you have an open discussion with your insurance agent to find out the best course of action for your problem. However, try to ensure that you do not let the policy lapse as far as possible. It will prevent you from subsequent tensions on policy revival.

(Contributed by Yashish Dahiya, CEO & co-founder, PolicyBazaar.com)