Discontinuance of Premium

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Definition:

Discontinuance of premium is the act when the life insured stops paying the premium. The discontinuance of premium could be either because of the surrender of the policy or due to death.

Description:

Often the insurance company provides a grace period of 30 days after the due date. If the life insured or the policyholder does not pay the premium during the grace period, the insurance company will terminate the policy.

In case of the death of the life insured, the insurance company waives off the premium and continues to extend the policy cover.

Example:

Miki purchased a child plan for his 7 years old son. After paying the premium for 5 years, Miki died within the policy term. It led to the discontinuance of the premium. The insurance company in this case, waives off the future premium and keeps the child’s future secured.

But, in another case, if Miki purchased a term plan worth Rs.1 crore for 20 years and if he stops the premium payment after 10 years, the insurance company will provide him a grace period. Owing to discontinuance of premium beyond the grace period, the life insurance policy will stand terminated.

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