Life can be unpredictable, and there may be times when keeping up with regular life insurance premiums becomes difficult. Whether it's a temporary financial crunch, job change, or personal emergency, insurers understand the need for flexibility. This is where the concept of a premium holiday comes to the rescue, giving policyholders a chance to pause payments without losing policy benefits.
Key Takeaways
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A premium holiday is a feature that allows policyholders to temporarily suspend premium payments for a defined period while keeping their life insurance policy active. It’s not the same as skipping a payment; instead, it’s a planned break approved by the insurer, often available after the policy acquires a surrender value.
During the premium holiday period, the insurer continues to keep the policy in force by adjusting the accumulated cash value or other policy balances to cover the premium due. This ensures that your coverage remains uninterrupted even when you are not making direct payments.
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Taking a premium holiday can be a smart option in times of uncertainty or financial pressure. It gives policyholders breathing space without losing long-term protection or the discipline of life insurance savings.
It offers relief during temporary hardships such as job loss, business slowdown, or medical emergencies. By pausing payments for a specific period, policyholders can focus on stabilising their finances without losing insurance coverage. This short-term flexibility ensures that long-term financial goals remain on track even when immediate liquidity is tight.
Your policy continues to remain active, ensuring that your loved ones are still financially protected during the premium holiday period. The insurer manages the unpaid premiums by utilising the policy’s value so that the cover doesn’t lapse. This not only provides peace of mind during uncertain times but also preserves the continuity of benefits and bonus accumulation.
A premium holiday prevents the risk of policy lapse or the need for reactivation processes, which often come with penalties or medical re-evaluation. It saves policyholders from the time-consuming reinstatement process that involves fresh underwriting or documentation. This convenience makes the premium holiday an efficient option for managing short disruptions in premium payments.
IRDAI extended the grace period for life insurance premiums due in March 2020 till May 31, 2020, during COVID-19, to avoid policy lapses.
Source: ET
When you opt for a premium holiday, your insurer applies the break under specific conditions such as policy type, accumulated value, and duration. It's important to understand how eligibility, time period, and policy status affect this benefit before making the request.
You can take a premium holiday only if your policy meets certain conditions.
The policy must have attained the minimum lock-in or premium payment period.
It should have acquired a sufficient surrender or fund value
All previous premiums should be paid up to date
The policy terms should allow a premium holiday feature
A premium holiday is allowed only for a limited period as specified by the insurer.
| Policy Type | Minimum Tenure Before Eligibility | Maximum Premium Holiday Period |
|---|---|---|
| ULIP (Unit Linked Insurance Plan) | After 3 years of continuous payment | 1 year (varies by insurer) |
| Traditional Endowment Plan | After 2-3 years of full premium payments | 6 months to 1 year |
| Term Plan with Premium Flexibility | After specific conditions stated in the policy | As per contract terms |
During the premium holiday, your policy remains in force. The insurer uses the accumulated cash value, fund value, or policy account balance to pay future premiums. If the balance becomes insufficient, the policy may lapse. Hence, monitoring your policy value during the holiday is important.
You can request a premium holiday by following a few simple steps:
Check if your policy offers this feature in the policy document
Ensure all eligibility conditions are met
Contact your insurer or advisor to initiate the request
Fill out the required form and provide supporting documents if needed
Wait for official approval from the insurer before skipping any premium payments
Many policyholders confuse a premium holiday with missing a premium due date, but the two are quite different. The table below explains how they differ in intent and effect.
| Basis | Premium Holiday | Premium Due Date |
|---|---|---|
| Meaning | An approved break from paying premiums | The scheduled deadline to pay a premium |
| Permission | Granted by the insurer under the policy terms | Automatic and occurs periodically |
| Policy Status | Remains active during the holiday | May lapse if not paid after the due date and grace period |
| Impact on Coverage | Coverage continues through policy value adjustments | Coverage can stop if payment is missed beyond the grace period |
| Financial Planning | A strategic choice | A regular obligation |
Though both involve non-payment of premiums, a premium holiday is a planned feature, while a policy lapse is an unintended consequence. The table below clarifies the key differences.
| Basis | Premium Holiday | Policy Lapse |
|---|---|---|
| Nature | Planned and approved by the insurer | Unplanned and automatic due to missed payments |
| Policy Validity | Active | Inactive |
| Control | Policyholder chooses to activate | Occurs without the policyholder’s control |
| Reinstatement Need | Not required | Required, often with conditions |
| Financial Impact | Temporary adjustment | Risk of losing benefits or sum assured |
A premium holiday is beneficial in certain situations, but not always the ideal move. The table below outlines both sides to help you decide wisely.
| Advantages | Drawbacks |
|---|---|
| Offers financial relief during tough times | May reduce the policy’s cash or fund value |
| Keeps coverage active without payment | Could affect maturity benefits or investment growth |
| Avoids policy lapse and maintains continuity | Limited duration; cannot be used frequently |
| Provides flexibility and control | Requires careful monitoring of policy value |
A premium holiday can be a practical solution when short-term financial challenges arise, but it’s important to use it judiciously. Before opting for one, review your policy terms, assess your fund value, and consult with your insurer or financial advisor. You may even consider options like adjusting premium payment frequency, using grace periods, partial withdrawals in eligible products, or revising cover amounts available at Canara HSBC Life Insurance.
It’s an insurer-approved pause on premium payments for a limited time while the policy stays in force, typically funded by cash/fund value.
Policies that allow this feature and have sufficient cash/fund value after a minimum premium-paying period, with dues paid up to date.
Duration is product-specific; many plans allow a short, defined window (for example, a few months up to a year), subject to terms.
Yes, coverage remains active as charges are adjusted against your policy’s value; if the value is inadequate, the policy may risk lapsing.
A premium holiday is planned and approved; a grace period is a short buffer after the due date; a lapse happens when payments remain unpaid.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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