What Happens If I Do Not Pay My Premium on Time?

2025-07-11

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Nowadays, life is busy, and sometimes, you skip important things, like paying a policy premium on time. Maybe the budget was tight, you forgot the due date, or you thought “one late payment will make no difference.” Well, that can hurt. Delaying or skipping the premium payment can cause inconveniences, from loss of coverage and policy lapse to heavy penalties.

Imagine using medical insurance at the hospital only to find out your insurance is inactive, or realise your motorcycle insurance has lapsed when you wanted to make a claim for an accident. Not a great feeling, right? Many insurance companies offer solutions to keep your policies on top. So, read this blog to understand the impact of late premium payments and how you can fix this situation.

Key Takeaways

The grace period provides a temporary safety net, allowing you to extend the date of the premium payment.
Policies can be reinstated, but only up to a certain period.
Lapsed policies can lead to reinstatement fees, higher premiums, interest on due premiums, and loss of perks, like a no-claim bonus.
Setting up Auto Debit and Annual Payments, turning on Reminders, and smart budgeting can help with timely premium payments.

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Grace Period: The First Line of Defense

Recently missed paying the premium on the due date? Do not worry — insurers generally provide a grace period. This is usually an extra time, 15 to 30 days, given by insurers to the policyholders to make the late payment of the premium without any hassle of facing penalties, ensuring your coverage stays safe.

Whether it is health or car insurance, during this period, the policy remains active to keep you protected. The sad part? Once the grace window is over, the insurer may cancel your policy, leading to further risks and penalties. Though this period is a valuable time, it is suggested not to depend on it. Instead, this can act as a buffer in difficult times.

Lapse of Policy: Losing Your Coverage

Suppose you were paying all your premiums on time for a year, but one international vacation made you skip your payment. Do you think it is fine? Think again! When there is a failure in the payment of the premium within the due date or the grace period, the policy lapses. It means - no coverage, no claims, no maturity benefits, and no payouts.

However, every policy handles lapses differently. A lapsed medical policy will not pay your medical bills, a cancelled automobile insurance can leave you with hefty bills for damages caused in an accident, and a lapsed life insurance could remove the safety net for your loved ones. Here, the good news is that some insurance companies allow reinstatement with additional costs. Remember, a policy is only advantageous when it is active.

Did You Know?

Many term policies are also “convertible,” as they can be converted into a permanent life insurance policy.

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Financial Consequences: Paying More in the Long Run

Before you plan on making a late payment or skipping a payment for policy premiums, take a look at the below financial hiccups and ask yourself, “Is it worth it?”

Increased Premiums: A policy is a commitment, and delayed or skipped payments can lead to lapses. When it comes to instating the policy later, your insurer may charge you higher premiums, considering your payment history.
Interest on Due Premiums: Upon failing to pay the premium within the due date or grace period, some insurance companies might ask to pay the overdue amount along with the interest on late payments. This will only make your debt grow.
Reinstatement Fees: Need your policy back? Well, it comes at a cost. Insurers levy penalties or extra fees on the policyholders to reactivate their lapsed policy. It is more like a fine paid for missing the premium payments.
Loss of No-Claim Bonus: If you have been holding a car or medical policy and have not claimed in the year, you are eligible for a no-claim bonus. However, with missed payments, you will have to say goodbye to this benefit.

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Reinstatement Process: Can You Get Your Policy Back?

With missed premium payments comes the fear of losing the insurance or coverage. The good part? You can always change the inactive status to active. The reinstatement process allows you to restore your lapsed policy with no hassle of buying a new one.

Wondering how it works? This method is like activating your paused subscription. Once the grace period is over, insurers may allow a reinstatement period — often ranging from 2 to 5 years — for the policyholder to revive a lapsed policy at an extra cost. All you need to do is clear unpaid premiums, undergo a medical exam, and a small cooling period before the coverage resumes.

Another fact is that reinstatement is not always an option. If too much time has passed or your insurability, such as health conditions or depreciation value, has changed significantly, an insurance company may decline the request, leading you to buy a new policy.

Legal and Credit Consequences of Non-Payment

If you are thinking about what happens when you skip or delay a premium payment, here are a few financial and legal consequences:

Impact on Credit Score: A good credit score means a good financial reputation. And when you miss a payment, your credit score drops. It will make it harder for you to get a credit card, loans, or low interest rates.
Legal Trouble Might Follow: Some insurers do not just write off or cancel the policy directly; they send the collection agencies to cover up for the unpaid premiums. Some may also file a legal action against you, making it difficult for you to settle the debt.
Policy Forfeiture: Do you have a ULIP component on your policy? If yes, then the insurer might cover the dues with the accumulated funds, reducing your overall investment value and cancelling the policy.

How to Avoid Missing Premium Payments?

No one likes the feeling of missing premium payments, paying additional charges, or losing coverage; therefore, these tips will keep you stress-free.

Set it on Auto Debit: This is one of the most effective ways to avoid missed payments. Link the premium payments to your bank account, and the amount will be paid automatically without you lifting a finger.
Set Reminders: When insurance companies ask you to allow reminders, always say yes to prevent delayed or skipped payments. You can also put reminders in your phone to save yourself from last-minute panics.
Go for Annual Payments: If paying monthly is overwhelming and your budget permits, opt for annual payments. It will eliminate the risk of missed payments and loss of money.
Budgeting: Tight budget becoming a hurdle? Plan your expenses in advance and set aside money or premiums, as missed payments can cost you more.

Pay Your Premiums on Time: Stay Covered with Canara HSBC Life Insurance

Loss of coverage, lapsed policy, higher premiums, hefty penalties, and policy termination - these are a few consequences of missed payments. Many insurers offer a 15 to 30-day grace period for late payments and up to three years to revive a lapsed policy, allowing for interrupted benefits and peace of mind. So, pay your premiums on time and make the most of your insurance policies.

Glossary

Sum Assured: The guaranteed amount paid to the nominee in case of the policyholder’s demise.
Rider: An additional benefit that enhances a term insurance plan, like critical illness coverage.
Term Insurance: Term insurance is a type of life insurance that offers financial protection for a set period.
Mutual fund: A mutual fund is a pool of money that is invested in stocks, bonds, and other securities.
Financial Dependents: Family members who rely on the policyholder’s income for their financial well-being.

FAQs

You can only file for a claim within the grace period. However, the claim can be rejected if the policy has lapsed.

Generally, insurance companies do not give any refund for unpaid premiums. But if you surrender the policy, you may get a partial refund.

To cover your premiums in difficult circumstances, reduce the coverage, use accumulated cash, or switch to a low-cost policy.

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.