How Reinstatement works?

[Expert]

The above question is not general. Every policy has its 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 with actual facts.

Just for your info -
DLF Pramerica Tatkaal Suraksha Gold - Policy Reinstatement

1. Reinstatement is available for up to 3 years from the date of first unpaid premium.
2. Reinstatement up to 90 days is done at the request of the policyholder without medical declaration; from 90 to 180 days with medical declaration; and over 180 days with medical examination.
3. Payment of all unpaid premiums with interest is required to reinstate the policy in all cases.
4. Once the policy is reinstated, all the benefits and additions under the policy would be reinstated.

[saisrisri]

please explain how interest is calculated.
Mode = Hly
Premium = Rs.1000/- per each mode
Date of commencement = 28/03/2008
Lapsed on = 28/03/2010

help me in calculating interest + total premiums due

[Expert]

Every policy has its 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 with actual facts.

Please specify the policy details.

[saisrisri]

please somebody help me in the above calculations. I have to appear for exam.

[Expert]

Saisrisri - There are various revival methods.
1- REVIVAL ON THE STRENGTH OF MEDICAL REPORTS SUBMITTED IN RESPECT OF A NEW PROPOSAL
2- Special Revival Scheme
3- Instalment Revival Scheme
As you have mentioned, you are studying at the moment, it's better to discuss with your current teacher. And it's also different for different products and decided by underwriter. I hope you are talking about LIC. Please see example below -

Instalment Revival Scheme :
DOC: 28.02.2001
S A : Rs 1,00,000
Plan : 14 – 25
Mode: Half yearly
Premium: Rs. 2850/-
Date of lapse: 28.02.2004
Date of revival: 25.08.2005

The calculation of revival arrears works out to be:
(1) 3 half yearly premiums due 02/2004 to 02/2005 @ Rs 2850/- : Rs 8550/-
(2) Late fee : Rs 702/-
Total : Rs 9252/-

Less Consideration amount
(equal to minimum of one half yearly premium) : Rs 2850/-
Balance of revival arrears to be spread over : Rs 6402/-
Date of lapse : 28.02.2004
Date of Revival : 25.08.2005
New premium due date : 28.08.2005
Policy anniversary : 28.02 every year

So the balance of revival arrears will be recovered along with the usual premium due under the policy from 28.08.2005 to 28.02.2007 (both inclusive) i.e. 4 half yearly premiums in this case.
(1) Total balance to be spread over : Rs. 6402/-.
(2) Factor ( 2 years Hly, i.e. m=2, t=2 & k=0) : 26.46

Then, the installment will be 6402 X 26.46/100 = Rs 1694 plus

Usual premium = Rs 2850
Then revised premium = Rs 4544/-

[saisrisri]

Thanks a lot expert for your reply. This helped me a lot. I am doing correspondence PG in Insurance so do not have any assistance from teacher. I am having few more doubts. Will post as and when I read the chapters.

[saisrisri]

Doubts:
a) How is the late fee arrived. Is it some % / slab rate of each mode. please elaborate.
b) Premium arrears are calculated for 3 dues i.e. feb 2004, aug 2004 and feb 2005 = 8550/- but later after adding late fee, one instalment is deducted i.e. 9252/- minus -2850-/. why? is it not required for policyholder to pay all dues
c) after all o/s dues are paid till feb 2007, does premium comes back to normal amount i.e. 2850/- rather than 4544/-

[Expert]

Please post the complete chapter from your course about reinstatement then I would be able to answer your query in detail.