Interest on Reinstatement

[ak76]

How to calculate interest during reinstatement of a lapsed policy.
Say for e.g.
Scenario 1:
Policy reinstated within 6 months from first unpaid due date.
Interest calculation method: Compounded half-yearly
Rate of Interest (R): 5%
Payment mode: Quarterly
Premium amount: Rs. 5,000
No. of installments due: 2
Total unpaid premium amount (P): Rs. 10,000
First unpaid due date: 10/02/2010
Second unpaid due date: 10/05/2010
Reinstatement date: 24/07/2010

Scenario 2:
Policy reinstated after 6 months but within 1 year from first unpaid due date.
Interest calculation method: Compounded half-yearly
Rate of Interest (R): 5%
Payment mode: Quarterly
Premium amount: Rs. 5,000
No. of installments due: 3
Total unpaid premium amount (P): 15,000
First unpaid due date: 10/02/2010
Last unpaid due date: 10/11/2010
Reinstatement date: 24/12/2010

Please advice.

[Expert]

Please read here - http://www.policywala.com/forum/showthread.php/1834-How-Reinstatement-works

Please don't post bookish queries, post actual queries here.

[ak76]

That was not helpful to me. I want to know how is the interest amount to be charged to the policy holder calculated on the premium amount if the interest is compounded half yearly for the scenarios I have posted.

[ak76]

This is not a bookish query. This is actual scenario.

[Expert]

Example -
Annual premium: 1200.00
Monthly premium: 120.00
Policy lapsed in 01/05/2010
Annual Interest: 8% from 02/05/2010 to 06/05/2011 (16 months)
Monthly premiums needed to reinstate: 17 (2040.00) = (16 months x 120)
Reinstatement Interest: ?

Formula -
Reinstatement Interest = (120*1.08^(16/12) - 120) + (120*1.08^(15/12) -120) + ..+ (120*1.08^(1/12) - 120)

Same way you can calculate your query interest.

P.S. In actual scenario there are not two options.

[Minal]

That was not helpful to me. I want to know how is the interest amount to be charged to the policy holder calculated on the premium amount if the interest is compounded half yearly for the scenarios I have posted.
Every policy has it's own set of conditions on which it can be revived and same is mentioned in the term and conditions or clauses of the policy. So be specific and in details in your query.