Payment of Insurance Claim on Lapsed Policy if Policy Holder Dies Within 6 Months of the Date of Premium

Almost before 20 years from now, one Nainaben Sheth of Ahmedabad in her mid 20s approached CERC. She lost her husband Atulbhai. He had a few LIC policies aggregating to 3.50 \text{ lacs} of rupees. He had not paid the last premium prior to his death. LIC therefore took a position that since the policies have lapsed it had no liability to pay the claims.

On the other hand LIC is usually and continuously trying to persuade the policyholders to revive the lapsed policies within 6 months from the due date of payment of premium with interest. The 6 months’ period has a relevance that there is no need for medical examination for revival of the policies. In the instant case Shri Atulbhai had died within 6 months from the date of payment of premium.

Extending LIC’s own logic, CERC pleaded that Atulbhai could have renewed the policy any time by payment of arrears of premium with interest within a period of 6 months without any medical examination. That is to say, LIC has an obligation to pay the sum assured after deducting arrears of premium with interest till the date of death.

LIC was not willing to accept our plea.

We went to the Civil Court which saw the substance in our logic, issued directions to LIC to pay the sum assured after deducting the arrears of premium with interest.

This has now become a binding precedent on LIC.

One can imagine the plight of the young widow in her mid 20s with two minor children as to the value of 3.50 \text{ lacs} received by her and that too not as a charity but by vindication of her right with self-respect and dignity.