Lapsation
One has to pay premium on the life insurance policy as and when it is due, failing which the policy will lapse, meaning, it will lose all or part of its benefit. Usually a grace period of 15-30 days is given to pay the outstanding premium, without having to pay any additional charges. But if the premium is not paid even during this period, the policy will lapse and you may have to pay a penalty to revive it. The penalty, that is, the interest amount is calculated from the due date and it varies with each insurance company.
Once you pay the penalty, the benefits on the policy will get re-instated. Generally, insurance companies give two years to revive a lapsed policy. After two years, there is nothing you can do to revive it. On a lapsed policy, you will not get the full benefits under it, be it on death/maturity. That is, in the case of term insurance policies, the policy will lapse and no benefits will be paid. In other policies such as endowment policies, you will receive the reduced benefits of the policy.
