Page 57 - IC23 life insurance application

Non-forfeiture Regulation

If the premium has been paid for a minimum period of 3 years and subsequent

premium is not paid, as per this non forfeiture regulation, the policy does not become

totally void. It becomes paid up to a reduced sum assured. This reduction in sum

assured is in proportion to the actual period for which premium has been paid

compared to the total period for which the premium was payable.

As a further concession, the LIC has provided that after three full years premium

have been paid and subsequent premium is not paid, if the policyholder dies within

six months from the date of first unpaid premium, the policy money shall be paid as

if the policy has remained in force subject to the deduction of the unpaid premium.

This is another useful privilege granted to the policyholder. As against this, some

other insurance company's have a system called automatic company's premium loan

option. If this option is accepted the policy does not get automatically paid up on

stoppage of payment of premium. The policy is kept in force by an automatic

withdrawal of premium money out of the surrender value of the policy and the

outstanding premium gets paid as long the surrender value lasts. As this withdrawal

is treated as a loan with interest, in course of time, the loan and interest totally

exhausts the present value of the policy and the policy value becomes zero.

However this policy can be revived in the meantime.

LIC has not accepted the system of Automatic premium loan system.

The clauses relating to Guaranteed Surrender Value, Loan, Nomination and

Assignment are further conditions and privileges and have been explained in great

detail in the previous chapter.

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