Policy revival and lapse

What is policy lapse and revival?

A life insurance policy lapses when a premium is not paid by the end of the grace period. A lapsed policy gives no cover: if the life assured dies, nothing beyond any accrued non-forfeiture value is payable. Revival is the process of restoring that policy, with its original benefits, by paying all the premiums due plus any interest or late fee, and satisfying the insurer that the life assured is still insurable.

The IRDAI (Insurance Products) Regulations, 2024 define revival as restoring a policy discontinued for non-payment, with all its benefits and with or without riders, on receipt of the dues during the revival period. The insurer must be satisfied about continued insurability under its Board-approved underwriting policy.

How lapse and revival work in India

The revival period. As of October 2026, under the 2024 Products Regulations:

What lapse means by product.

• A non-linked policy that has not acquired a surrender value lapses fully. One that has acquired a surrender value does not lapse; it continues as a paid-up policy and can still be revived to full cover.
• A ULIP discontinued in the five-year lock-in moves to the discontinued policy fund and loses risk cover. The insurer must write to the customer within three months of the first unpaid premium and offer revival. If the customer does not revive, the proceeds are paid at the end of the lock-in or the revival period, whichever is later.
• A ULIP discontinued after the lock-in becomes reduced paid-up, with the option to revive within three years or withdraw completely.

What revival costs. For non-linked plans, the policyholder pays all unpaid premiums with interest or a late fee as set in the policy, and may need to give a health declaration or undergo medical tests. For ULIPs revived during the lock-in, the master circular is more generous: the insurer collects the due premiums without interest or fee, may levy only allocation and policy administration charges for the gap, and must add back the discontinuance charge deducted earlier. A decision on revival is due within 7 days of receiving all requirements, under the 2024 policyholder protection master circular.

What restarts on revival. The three-year contestability window under Section 45 runs from the date of revival, if that is later than the policy date. The 12-month suicide clause also restarts from the date of revival.

Revival campaigns

Insurers run special revival drives with late fee concessions. LIC, for example, ran a Special Revival Campaign from 1 January to 2 March 2026 for individual lapsed policies. It offered 30% off the late fee on non-linked plans (capped at ₹3,000 to ₹5,000 depending on premium due) and a full waiver for micro insurance plans. Medical requirements were not relaxed.

What policy revival means for distribution

Lapse and revival are where persistency is lost and won. For most distribution teams the economics of a revived policy are better than those of a new sale of the same size.

• Lapse is a sales quality signal. The master circular asks insurers to examine persistency across all distribution channels and act against mis-selling that leads to lapses. A partner or branch with high early lapses will be reviewed, regardless of new business volume.
• Work the lapse list early. The longer a policy stays lapsed, the more arrears and interest pile up and the more likely the customer's health has changed. For ULIPs the insurer's own notice must go out within three months of the first unpaid premium, and a distributor call around the same time makes the offer personal.
• Use the ULIP rules. Customers often assume a lapsed ULIP is lost. Telling them that a revival within the lock-in costs no interest and returns the discontinuance charge is a strong reason to come back.
• Compare revival with a new policy honestly. An older policy usually carries a lower entry-age premium and is past its contestability period. Replacing it with a new policy restarts Section 45 and the suicide clause, which can work against the family.
• Health disclosure on revival matters. Revival is a fresh underwriting moment. An agent who helps a customer fill a revival declaration should record changes in health accurately, because a claim soon after revival can be investigated on that declaration.
• Commission follows the premium. Renewal commission on revived premiums is payable under the insurer's board-approved commission policy, so revival work is also income recovery for agents.