I wish to know how different insurance companies have different defination for "lapsed" and "Paid up" policies. Is there a specific section in the insurance Act?
nagaraja k (Insurance Advisor) 30 July 2009
I wish to know how different insurance companies have different defination for "lapsed" and "Paid up" policies. Is there a specific section in the insurance Act?
SANJAY JOIL (LAW STUDENT) 27 August 2010
Yes, section 113 of the Insurance Act,1938 deals with this. If a premium is not paid for 3 years then is policy is lapsed without acquiring surrender value. After payment of premium for 3 years your policy is lapsed with surrender value. paid up policy amount is calculated as under :
SUMASSURED X PREMIUM PAID FOR / PREMIUM PAYING TERM. IF THE SUM ASSURED IS 100000 AND THE TERM IS 20 YEARS AND IF YOU PAID PREMIA for only 3 years then paid up value will be :
100000 X 3/20 ie 15000 . then bonus ( now payable after 3 years) is added in it. However this amount is payable at the time of maturity . Its present value is known as surrender value.
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