Non-forfeiture regulations

Non-forfeiture regulations are important privileges provided under ‘Conditions and privileges’ of a policy. In the usual reading of a contract if one of the parties fail to play his part the contract becomes void; i.e. if the premiums are not paid by the policyholder he cannot expect the insurer to perform his promise. Whatever he has paid to the insurer is forfeited. The non-forfeiture regulations provide that even if premiums are not paid after a certain number of premiums are paid the policy will not be wholly void. The non-forfeiture regulations quoted here is from a policy of the Life Insurance Corporation of India. Other insurers may have their own definition of lapse and non-forfeiture.

If, after at least three full year’s premiums have been paid in respect of this policy, any subsequent premium be not duly paid, this policy shall not be wholly void but shall subsist as a paid up policy for a reduced sum payable on the date of maturity or at the life assured’s prior death provided that the paid up sum assured is not less than Rupees 250. The amount of paid up assurance per integral number of years premiums paid will be calculated as per table given below. The policy so reduced shall be free from the liability of payment of future premium. It shall not be entitled to participate in future profits. The existing bonus additions, if any, shall remain attached to the paid up policy.

If at least three full year’s premiums are paid and subsequent premiums are unpaid and if death of the life assured takes place within six months of the first unpaid premium the death claim will be honoured  and premium + interest till date of death will be recovered from the claim. Also unpaid premiums till next policy anniversary will be recovered.

If at least five full year’s premiums are paid and subsequent premiums be not paid and the life assured dies within twelve months from the first unpaid premium the death claim will be honoured and the unpaid premium till date of death will be recovered with interest and the premium till next policy anniversary will be recovered without interest.

Key words:

Conditions and privileges

Non-forfeiture regulations

Paid up policy