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Industrial policies

Under these policies the premium is usually collected by an agent or employee of the life office on a regular basis being either each month or every two weeks. The agent or employee visits the policyholders home to make the collection. The premium is collected in cash and the policyholder’s premium book is signed to acknowledge the payment.   The monies are then handed over to the life office at the end of the day.

Arrears policies

Premium payments can fall into arrears and all life offices have systems to follow these cases up.  Because of the cost of acquiring the business it is in the life offices interest to continue the policy if possible. The life office will write to the policyholder to advise them of the situation and explain the consequences of not continuing with the life policy.   They will usually give the policyholder a period of time in which to correct the situation and may charge a ‘late payment penalty’ to make up for the interest lost and administrative costs involved. If the policyholder makes the premium payment in the required time the policy continues to run, if not then the policy will lapse.

If the policy lapses then it will depend whether or not it has any surrender value. If there is no surrender value then there is nothing for the life office to do other than to mark up its records that the policy has lapsed.

If there is a surrender value then the life policy will apply the policies surrender conditions, which may be one of the following, The above systems are now mainly computerised so that the system operates automatically. If the policy has been mortgaged then the life office will normally advise the mortgagee.
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